Maldives doubles resort currency conversion to 40% as industry and lenders raise concerns

MALÉ, Maldives: The Maldives has introduced a revised foreign-currency framework requiring Category A tourism establishments, including resorts, to convert 40 percent of their monthly gross foreign-currency sales into rufiyaa through banks licensed by the Maldives Monetary Authority (MMA), at the official rate of MVR 15.42 to the US dollar.

The figure is double the 20 percent the MMA proposed to the industry in early August, and it has drawn objections from resort operators and questions from their lenders.

President Dr Mohamed Muizzu ratified the first amendment to the Foreign Currency Act on August 31, 2026, following its passage by the People's Majlis on August 26. The amendment came into force on September 1. Speaking to reporters after signing, the President said the country's resorts "are assets of this state" and that every resort could meet the requirement after paying its loans, salaries, and operating costs.

Under the amendment, converted amounts must be deposited into a foreign-currency account with an MMA-licensed bank and exchanged by the 28th day of the following month. The previous option of converting USD 500 per tourist has been removed.

Foreign currency may only be traded at rates or within bands set by the MMA, and selling or advertising it above those rates is now an offense. For businesses outside tourism, the income threshold that triggers conversion rises from $15 million to $25 million a year.

The MMA's early-August proposal of a uniform 20 percent went to the Maldives Association of Tourism Industry (MATI), which represents 146 of the country's 183 resorts and had argued for a ceiling of 10 percent. Both parliamentary committee reports on the bill also recommended 20 percent.

The 40 per cent figure was moved from the floor by a government member on the day of passage and carried 47 votes to 12. MATI called the requirement not viable, and the President's tourism adviser resigned, telling local media that doubling the conversion would not ease the dollar shortage.

Resorts run on imported fuel and import almost everything guests consume apart from fish. Many of their obligations to the state are also due in dollars, including a 17 percent tourism goods and services tax, a green tax of $12 per guest per night, corporate taxes, and land rent. Most resort debt is owed to foreign lenders and repaid in dollars.

The conversion is taken from gross sales before any of those costs are met, so resorts surrender dollars at MVR 15.42 and must then buy them back. The country's largest bank has capped foreign-card spending for its own customers, and the parallel market has traded above MVR 20 to the dollar for longer than at any point on record, reaching around 23 in late August. Publishing that rate is now an offense.

Resort loans in the Maldives are priced against sponsors' balance sheets rather than island cash flow, because domestic banks lack the capacity to fund them and export-credit agencies place the country in the lowest OECD country-risk category. International facilities typically require debt-service cover of around 1.20 times.

A monthly conversion obligation with daily-compounding penalties and a license-suspension trigger narrows that margin, and license suspension is an event of default under standard loan agreements. Section 12 of the Act allows the MMA to exempt a business that cannot otherwise service foreign-currency debt owed abroad, and the amendment widened that discretion. There is no public record of an exemption ever being granted.

The government says the measures will bring more foreign currency into the formal banking system. MMA Governor Ahmed Munawar said the higher requirement was expected to increase the dollars available to commercial banks. President Muizzu said the tourism industry earned $5.6 billion last year, of which $3.8 billion entered the banking system.

At an August press conference, four ministers said certain resort operators were supplying the parallel market, without naming any. The MMA's compliance report, released two days earlier, put average conversion compliance across resorts at 78.55 per cent. Five of 183 resorts had converted nothing, and the MMA named two.

It also said most resorts converting below the threshold had exemption requests still pending with the MMA. The Governor said 56 percent of dollars converted under the mandate had gone to servicing state debt, and MMA data show USD 608.6 million of reserves paid on government external debt in the first half of 2026, up more than 200 percent on a year earlier.

The conversion rule is the latest of eight measures affecting the resort sector in 20 months. The green tax has doubled, and departure taxes rose up to fourfold on bookings already sold. A foreign tour-operator license became mandatory in December 2025, but the regulation defining it, due by March 2026, has not appeared. A $100,000 annual lease-extension fee later doubled, and an offshore tourism GST passed in six weeks in a sector that sells its winter season a year ahead. The conversion amendment itself was announced, passed, and ratified within a week.

Four developments will show whether the tightening has run its course: whether the government tables the 100 per cent conversion goal the MMA Governor named in August; whether any Section 12 exemption is published; whether the offshore-GST regulation appears before the tax takes effect; and whether the parallel exchange rate remains visible once the publication offense is enforced.

The MMA is responsible for implementing the exchange-rate framework and its compliance requirements.