The Maldives Monetary Authority (MMA) has announced that a comprehensive amendment of the country’s banking laws is under way, with the reforms aimed at strengthening domestic banks, increasing liquidity within the financial system and retaining a significantly larger share of the foreign-exchange earnings generated by the Maldives’ tourism industry.
Speaking at a press conference held at the President’s Office, MMA Governor Ahmed Munawwar said the reforms form part of a broader effort to strengthen the country’s financial architecture and ensure that the substantial foreign-currency earnings generated by the tourism sector contribute more directly to the domestic economy. The Maldives generates approximately USD 5 billion annually from tourism, making the industry the country’s most important source of foreign-exchange earnings and a central pillar of economic activity.
Governor Munawwar noted that a considerable share of tourism-related foreign-currency revenue has historically remained outside the domestic banking system. Following adjustments made to foreign-exchange regulations after the COVID-19 pandemic, the proportion of US-dollar receipts processed through Maldivian banks has increased from approximately 10 percent to 21 percent. While describing this as an important improvement, the Governor said a significant portion of the estimated USD 5 billion generated through tourism continues to remain offshore rather than circulating within the Maldivian financial system.
The reforms are particularly significant for the Maldives’ resort-driven tourism economy. Resorts remain major generators of foreign-currency revenue through accommodation, tourism services and other visitor expenditure, while the wider tourism industry supports thousands of jobs and extensive business activity across transportation, construction, food supply, logistics, telecommunications and other sectors. Strengthening mechanisms that encourage tourism earnings to pass through domestic banks could therefore provide the financial sector with greater access to foreign currency and improve its capacity to support businesses operating throughout the economy.
Governor Munawwar highlighted the recent amendment to the Payment System Act and the pending legislation relating to the Destination Principle, which is currently before Parliament, as important components of what he described as a structural and gradual effort to establish a comprehensive financial framework. The approach reflects the Government and MMA’s wider objective of modernising the financial system while creating stronger mechanisms for retaining and circulating foreign-exchange earnings within the Maldives.
The Governor also drew attention to restrictions currently affecting the ability of domestic banks to finance resort development. He said local banks are presently unable to extend loans for resort development, despite tourism being the Maldives’ largest economic sector. Improving the availability of foreign currency within the banking system could strengthen the capacity of domestic financial institutions and create greater opportunities for locally based financing to support future tourism investments and other productive sectors.
Retaining more foreign currency domestically could be particularly important as the Maldives continues to expand and diversify its tourism industry. Resort development requires substantial long-term financing for construction, infrastructure, renewable energy, utilities, transportation and other facilities. A stronger domestic banking sector with improved foreign-currency liquidity could therefore play a more meaningful role in supporting investment while allowing a larger share of the economic benefits generated by tourism to remain within the country.
Governor Munawwar said that if dollars generated within the economy can be retained locally, the capital will remain within the domestic financial system and can be utilised to strengthen economic activity. He highlighted that domestic banks reported profits of approximately USD 356 million last year. However, around 11 percent of those earnings, equivalent to approximately USD 38 million, flowed abroad. Over the past five years, the cumulative outflow through branches of foreign banks has amounted to approximately USD 200 million.
The MMA’s reform agenda consequently seeks to strengthen domestic banking capacity, improve liquidity and develop a financial environment in which a greater share of locally generated capital remains available for economic development. Increasing the amount of tourism-related foreign currency entering Maldivian banks could enhance banks’ ability to meet foreign-currency demand, finance businesses and support investment while improving the overall resilience of the financial sector.
Another important component of the reforms is encouraging a greater proportion of domestic transactions to be settled in Maldivian rufiyaa. Expanding the use of the national currency for local economic activity could reduce unnecessary dependence on foreign currency for domestic transactions while allowing valuable US-dollar earnings to be better utilised for international payments, imports, debt obligations and other external requirements.
The Government’s broader economic policy has placed increasing emphasis on strengthening foreign-exchange management, improving financial-sector resilience and ensuring that the economic value generated by the Maldives’ globally successful tourism industry delivers greater benefits to the domestic economy. The ongoing banking reforms are expected to complement these objectives by establishing a stronger regulatory foundation for local financial institutions and improving the circulation of capital within the country.
With tourism continuing to remain the backbone of the Maldivian economy and resorts attracting travellers from markets across the world, strengthening the link between tourism earnings and the domestic banking system could provide substantial long-term economic benefits. By retaining a greater share of foreign-exchange revenue locally, expanding banking capacity and strengthening the role of the Maldivian rufiyaa in domestic transactions, the reforms are intended to create a more resilient financial system capable of supporting tourism investment, private-sector growth and the country’s wider economic development.
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