Maldives plans to shift all domestic transactions to national currency
Central bank wants to reduce economy’s heavy reliance on foreign currencies and increase demand for rufiyaa as part of wider reforms to ease pressure on scarce US dollars
MALÉ, Maldives (MNTV) — The Maldives plans to make its national currency the primary means of payment for all domestic transactions by the end of 2030, in a major push to reduce the heavily dollarized economy’s dependence on foreign currency.
Maldives Monetary Authority Governor Ahmed Munawwar announced the goal at a press briefing, saying more than 40% of transactions in the country are currently conducted in foreign currencies, particularly U.S. dollars.
The shift would mean businesses that currently make domestic payments in dollars would increasingly have to use Maldivian rufiyaa instead.
Munawwar cited resorts and Trans Maldivian Airways, which pay some employees in dollars, as examples of businesses that would eventually need to pay salaries in rufiyaa.
Tourism businesses could also be required to pay land rents owed to the government in rufiyaa rather than foreign currency.
The policy is intended to increase demand for the national currency while reducing the use of dollars for transactions that take place entirely within the Maldives.
The issue is particularly important for the Indian Ocean island nation because of the unusual structure of its economy. Tourism generates large amounts of foreign currency, but the Maldives simultaneously depends heavily on dollars to pay for imported food, fuel and other goods as well as its external financial obligations.
The country has consequently faced recurring shortages of dollars in its domestic banking system and a parallel foreign-exchange market where dollars can command a premium over the official exchange rate.
Increasing the use of rufiyaa for salaries, rents and other domestic payments could reduce unnecessary demand for dollars and help keep more foreign currency within the formal financial system for imports and other external payments.
Munawwar said increasing demand for the rufiyaa was an important objective of the central bank.
The proposed shift is part of broader changes to the Maldives’ foreign-exchange system rather than an isolated currency measure.
Under proposed amendments to the Foreign Currency Act, resorts would be required to convert 40% of their foreign-currency revenue into rufiyaa, up from the current 20%.
The existing system allows resorts to meet their conversion obligation either by exchanging $500 for every tourist or converting 20% of monthly foreign-currency revenue. Under the proposed changes, the revenue-based requirement would become mandatory.
Foreign-currency conversion would also have to take place monthly rather than once every three months, while the central bank plans to introduce greater monitoring of how businesses use their foreign-currency earnings.
At the same time, the annual foreign-currency earnings threshold at which businesses are required to deposit their earnings in domestic bank accounts would rise from $15 million to $25 million.
Munawwar also outlined a longer-term plan to move the rufiyaa toward a managed floating exchange-rate system, under which its value would be allowed to respond more to market conditions while the central bank retained the ability to intervene.
He cautioned, however, that the Maldives would first need adequate foreign-currency reserves before such an exchange-rate system could safely be introduced.
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