Every serious assessment of the Maldivian economy over the past two decades has said a version of the same thing. The country earns its living in dollars and spends its life in Rufiyaa, and far too little of what it earns ever passes through a Maldivian bank. Reports were written, advice was taken, and the hard part was left for the next administration to worry about.
It was not left this time. Within a single week in August, the government tabled a bill that would allow the Maldives Monetary Authority to name a single national payment switch, and sent a wide package of foreign exchange amendments to the Attorney General’s Office. The central bank, for its part, raised the weekly supply of dollars it releases to banks by 51 percent and tightened the amount of cash commercial banks must hold in reserve.
Each measure looks technical on its own. Together they amount to the most sustained attempt yet to bring the country’s money, both rufiyaa and dollars, back inside a system the Maldives owns and controls. And each rests on a decision President Dr Mohamed Muizzu took knowing exactly who would object.
The problem every government knew, and none would touch
The dollar shortage is not new, and neither is the explanation for it.
Tourism generates the overwhelming share of the country’s foreign currency, but for most of the industry’s history there was no legal obligation on resorts to bring any of it home. Room revenue could be received and held abroad. Meanwhile the Maldives imported nearly everything it consumed, and had to find dollars to pay for it. The gap between the two was filled by an unofficial market where the dollar has long traded above the pegged rate, and where ordinary importers, students and patients paid the difference.
The strain was made worse by what happened during and after the pandemic. With provisions of the fiscal responsibility framework suspended, the state borrowed directly from the central bank, a practice known as monetary financing. MMA figures put the total created this way at about MVR 8.2 billion, roughly USD 531 million, over three years. That money did not disappear. It sat in the banking system as surplus Rufiyaa, and surplus Rufiyaa in an import-dependent economy eventually goes looking for dollars.
The remedies were understood. Require exporters of services to convert a share of their earnings. Stop financing deficits by creating money. Drain the excess. Build payment infrastructure the country controls. None of it was politically comfortable, and none of it was done.
The law he signed against the industry’s will
The Foreign Currency Act, which Muizzu ratified in December 2024 and which came into force the following month, was the first Maldivian law to make conversion compulsory. Resorts were required to exchange USD 500 for every tourist, or 20 percent of monthly foreign currency revenue, with a lower rate of USD 25 per tourist for guesthouses and smaller properties.
The response from the tourism sector was immediate and organised. Resort operators pushed back hard, and the government offered concessions before the bill reached its final form. Few measures in recent Maldivian politics have set a president so directly against the industry that funds so much of the country’s politics. The concessions bought passage. The principle, that earnings made in the Maldives must return to the Maldives, survived intact.
The results are visible in the reserve figures. Official reserves passed USD 1 billion for the first time in January 2026, up from USD 983 million at the end of the previous year, while usable reserves recovered to about USD 300 million, the highest level since the pandemic. The MMA attributed the improvement to the tourism recovery and to firmer enforcement of the Act.
Those gains have since come under pressure. Dollar inflows began falling in February as unrest in the Middle East slowed arrivals, with March arrivals down 20.7 percent year on year, and the unofficial rate has climbed back above MVR 22. The point of the reforms was never that they would make the country immune to external shocks. It is that a country with rules, reserves and its own infrastructure absorbs a shock differently from one without.
Refusing to let the compromises stand
The package now with the Attorney General’s Office is aimed squarely at the concessions granted in 2024, which is the clearest signal yet that the government treated them as a delay rather than a settlement.
The central change concerns the luxury resorts classified as Category A. At present they may choose between USD 500 per tourist and 20 percent of monthly earnings. Because top-end room rates run to thousands of dollars a night, the per-guest option lets exactly those properties earning the most convert the least. The amendment would remove the choice and make 20 percent mandatory. The MMA estimates this alone would bring an additional USD 100 million a year into local banks.
Category B businesses, meaning guesthouses, hotels and safari vessels, would keep their existing options. Non-tourism earners in Category C would still convert 20 percent, though the threshold bringing a business under the rule would rise from USD 15 million to USD 25 million a year. A new clause would let the MMA lower the required percentage for particular sectors or ownership structures, including fully Maldivian-owned firms.
The package also closes a quieter gap. Every covered business would have to name a foreign currency account at a local bank and deposit its foreign currency sales into it. Resorts would have to operate card terminals connected to domestic bank accounts, so that money a guest spends on the island lands in the Maldivian banking system rather than in an account overseas. Businesses would also have to disclose foreign debt. The MMA would retain discretion to grant instalment plans and relief where compliance is genuinely difficult.
Further ahead, the authority has set out a goal it calls full ‘Rufiyaaisation’: collecting taxes in Rufiyaa, removing exemptions, raising conversion percentages, and limiting domestic payments made from foreign currency accounts. It has also signalled that as reserves strengthen, a more flexible exchange rate could be considered.
Building infrastructure the Maldives owns
The bill the government sent to Parliament this week addresses the other half of the problem, which is who controls the road the money travels on.
The amendment to the National Payment System Act would insert a new provision after Article 15, giving the MMA power to designate one system as the National Payment Switch. Payment transactions would then have to be processed and routed through it, and all payment service providers would have to join within a period set in regulations, with the MMA able to permit interim arrangements during the transition.
A switch is best understood as a junction. When money moves between two different banks, the instruction has to travel from one to the other, and a switch is the shared road that carries it. Without one, every institution builds private roads to every other, which is slow, costly and hard to supervise. With one, any customer of any bank or wallet can pay any other, which matters most to small businesses and to islands served by a single provider.
The government’s preferred system is Favara, the instant payment platform the MMA introduced in 2023, through which domestic interbank transfers already run. The legal foundation was laid in August 2025, when President Dr Mohamed Muizzu ratified the first amendment to the Act, allowing the MMA to modernise the payment system, establish an independent company to operate it, and fine unlicensed operators between MVR 100,000 and MVR 10 million. That company, Payment Maldives, is intended to run retail systems at arm’s length from the central bank.
Ownership of this infrastructure is a sovereignty question as much as a technical one. A country that routes its domestic payments through networks it does not control pays fees it does not set and depends on decisions it does not make. A country that owns its switch negotiates from a different position, which is precisely what happened on 30 July when Favara was linked to India’s Unified Payments Interface. The Maldives arrived at that table with infrastructure of its own, and connected on its own terms rather than being absorbed into someone else’s.
Bank of Maldives and Maldives Islamic Bank are the first institutions offering the service, and customers can send money to UPI-enabled accounts in India within seconds. The scope is deliberately narrow for now: person to person transfers only, from the Maldives to India only, limited to education, medical treatment for holders of long term medical visas, and family maintenance, capped at INR 24,000 a month. Merchant QR payments are planned next, and testing of the reverse route is expected soon. With the launch, the Maldives joined Singapore and Nepal as the only countries with a live cross-border UPI link.
Relief for importers, discipline for the banks
Two shorter-term measures sit alongside the structural work.
The MMA has raised the weekly supply of dollars it releases to banks by 51 percent for the next three weeks, to help businesses fund imports through telegraphic transfers and letters of credit, with particular attention to small and medium enterprises that carry the least weight at the bank counter. It is the third such increase this year, following a 32 percent rise during Ramadan for staple food importers and a 26 percent rise in June for the tourism off season.
At the same time, the surplus Rufiyaa created in earlier years is being drained. From September, banks must hold 11 percent of their Rufiyaa deposits with the central bank, up from 10.5 percent, rising by stages to 13 percent by December 2027. Open market operations have been strengthened by a further 10 basis points. Since these operations resumed in July 2025, an average of about MVR 2.7 billion has been absorbed, and short-term excess liquidity has fallen from roughly MVR 6.5 billion to about MVR 3.7 billion.
Higher reserve requirements reduce what banks can lend and earn. That is the intended effect, and it is not popular with the institutions bearing it.
A president absorbing the cost of the cure
There is no version of this programme that wins applause in the short term. Requiring resorts to convert a fifth of their earnings takes money from the country’s most powerful industry. Raising reserve requirements squeezes the banks. Mandating a single payment switch reduces the freedom of providers who built their own arrangements. The benefits, meanwhile, arrive slowly and are spread thinly across the whole economy, while the costs land immediately on people who can afford lobbyists.
That is the ordinary reason such reforms are deferred, and why the Maldives deferred them for a generation. What distinguishes the present moment is not that the diagnosis has changed, because it has not, but that a president has chosen to administer the treatment and carry the political cost of doing so.
Parliament has only begun debating the payment switch bill, and the foreign currency package is still with the Attorney General’s Office. Neither will settle the dollar question by itself, and the pressure from a weaker tourism season is real. But the direction is now unambiguous: the country’s earnings brought home, its surplus currency drained, and its payment infrastructure built, owned and operated in the Maldives.
