The central bank, Maldives Monetary Authority (MMA) has reported a 21 percent increase in the amount of dollars entering local banks following the reforms brought under the Foreign Exchange Act.
The Foreign Exchange Act, which requires tourism establishments to exchange or deposit their US dollar revenue to local banks, came into effect on 1 January this year. The MMA said the central bank has taken strong measures to curb the unofficial appreciation of the dollar in the black market.
Since the introduction of the Foreign Exchange Act, USD 364 million has been deposited with banks as of June this year. MMA said the key aim is to increase the amount of dollars available to small and medium enterprises by 50 percent.
The MMA said the proportion of foreign exchange inflows to Maldivian banks had remained at 10 percent over the past four years. However, with the new regulations in place, this figure has now increased to 21 percent, MMA said.
MMA explained that while 90 percent of foreign exchange earnings go to the central bank, 60 percent of this is used for various government purposes and to increase reserves. This year, USD 174 million has been utilised for debt repayment, marking a 51 percent increase compared to the same period last year.
In addition to the debt servicing, dollars are also spent on other essential imports, such as fuel and staple foods. In addition, 30 percent of the 90 percent received by the MMA is provided back to banks as market intervention.
The MMA clarified that not all the dollars inflows routed to the authority used for debt repayment and various government purposes. In contrast, 30 percent of the amount brought to the MMA is always provided to the public through the banking system, it said. The MMA also said that priority has been given to providing foreign exchange assistance and support, especially to medium-sized enterprises, adding that banks, which were previously providing telegraphic transfer (TT) support of 5 percent of the requirement, dollars are now provided for up to 30 percent. The MMA aims to increase this figure to 50 percent, MMA said.
According to the central bank, appropriate changes have been made in the country’s foreign exchange policy, and the full benefits of these measures will become apparent with the measures taken to improve the economic situation, the MMA said.