Government’s New Tourism Revenue Regulations Draw Criticism from MDP 

Chairperson of the Maldivian Democratic Party (MDP), Fayyaz Ismail,  has expressed concerns over the changes in tourism revenue regulations implemented by the government, calling them “the most consequential decision” made by the administration to address the country’s ongoing foreign currency crisis. 

The new policy mandates that all tourism revenues be deposited within the Maldives and imposes a compulsory surrender of USD for each tourist.

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The recent changes mandated by the government, requiring all tourism revenues to be deposited in the Maldives and imposing a mandatory surrender of USD for each tourist, represent the most consequential decision taken by the current administration to address the foreign currency…— Fayyaz Ismail (@faya_i) October 2, 2024

While Fayyaz acknowledged that the move could help alleviate some pressure on the foreign currency market, he criticised the manner in which the policy has been introduced. He highlighted that in 2022, the cabinet approved a requirement for tourism operators to surrender a percentage of their revenue, offering guarantees that foreign exchange earners would have their needs met.

However, due to factors such as a tax increase on tourism goods and services (TGST) and the industry’s recovery from the COVID-19 pandemic, the Maldives Monetary Authority (MMA) did not implement the decision at the time.

Fayyaz also pointed out that this new measure alone would not be sufficient to stabilise the dollar market. He stressed the need for broader economic reforms, including reducing government expenditure, aligning monetary policy, and improving oversight of money-changing institutions.

He urged the government to reconsider the regulation, suggesting that the compulsory USD rate per tourist be replaced with a percentage-based approach, linked to foreign income received. He warned that the current form of the policy could severely impact small guesthouses and lower-tier resorts, many of which are increasingly receiving payments in Maldivian Rufiyaa (MVR).

Additionally, he highlighted concerns about unequal treatment between guesthouses and the liveaboard (safari) industry, which could harm middle-market resorts and liveaboard businesses.

Fayyaz called for wider consultations with stakeholders to ensure that the regulation is reviewed and a consensus is reached. He emphasised that failure to do so could lead to unintended consequences, potentially affecting the viability of small and mid-range tourism establishments and hindering future foreign investment in the sector.