The Solution to US Dollar Availability Issues: Reduce Expenditure, NOW!

An issue almost everyone in the Maldives, whether local or foreign, is grappling with is this: where can one obtain US dollars at the official exchange rate of MVR 15.42?

While the Maldives Monetary Authority (MMA) continues to report that there has been "No significant change vs. previous months" in the Statistics Database, the reality experienced by individuals and businesses is very different.

How does a country that marketed itself as one of the world’s premier luxury tourism destinations for decades end up in this situation? Was it the years of corruption? Years of the rich getting richer while the poor looked on from the sidelines? Ever-expanding government expenditure and never-ending political promises and pledges? Or was it a combination of these and a myriad of other factors?

Tourism is the mainstay of the Maldivian economy. For years, we proudly claimed that "Masverikamakee Dhivehinge Leynaaru"—Fisheries is the lifeblood of Maldivians)—but today that is no longer the case.

Tourism as the backbone of the country is here to stay. The Maldivian economy is largely dependent on the sector and the country's economic performance closely mirrors tourist arrivals. According to official statistics, the tourism sector directly accounts for around 22 percent of GDP, 60 percent of foreign currency earnings and contributes nearly 50 percent of government revenue.

Given tourism's dominant role in generating foreign exchange, one would reasonably expect US dollars to be more readily available within the domestic economy. Yet that has not been the case.

The Foreign Currency Act came into force on 1 January 2025, mandating businesses operating under Maldivian law to exchange part of their foreign currency earnings through banks operating in the Maldives, which in turn are required to sell a specified percentage to the MMA.

Under the Act, businesses were categorised into three groups. Resorts and resort hotels are mandated to exchange USD500 per tourist per month or 20 percent of gross monthly foreign currency receipts through local banks. Hotels, guesthouses, and safari vessels are mandated to exchange USD25 per tourist per month or 20 percent of their gross monthly foreign currency receipts. Other businesses with annual foreign currency sales or purchase transactions exceeding USD15 million are mandated to exchange 20 percent of their gross foreign currency receipts through local banks.

While many tourism sector operators opposed, and continue to oppose, these legislative changes, they have proved to be a positive move, ensuring that more of the foreign currency earned using the country's natural resources through the tourism industry flowed through the domestic banking system instead of remaining outside it.

The requirement for banks to sell a specified portion of these foreign currency receipts to the MMA, with funds subsequently reallocated to the banks earmarked for designated purposes, was also intended on paper to improve public access to more foreign currency at the official exchange rate.

According to the MMA, it supplied USD1.1 billion to the foreign exchange market in 2025, an annual increase of 10 percent compared to the previous year. Of this amount, USD650.9 million was sold to State Owned Enterprises (SOEs) and USD447.6 million was channelled through commercial banks to meet public and business demand. The MMA also provided an additional USD436.0 million in 2025 to support external debt servicing and other foreign payments.

So why does the shortage of USD persist? Why are commercial banks tightening card usage for foreign currency-based transactions?

There are several possible explanations.

One possible explanation is that the additional foreign currency collected under the Foreign Currency Act is being directed towards other pressing needs. While the MMA has not yet published data on its foreign exchange market interventions for 2026, the demands on the country's foreign currency reserves have remained substantial.

In April 2026, the government repaid the USD500 million sovereign sukuk issued in 2021, together with the final coupon payment of USD24.6 million. The government also repaid the USD400 million Indian currency swap. Despite these repayments, more than USD600 million in external debt service obligations are due during the remainder of the year, with no evident public financing plans on how this will be achieved.

At the same time, the conflict in the Middle East, and the subsequent decline in tourist arrivals, combined with the current low season in Maldives' tourism, has exacerbated an already fragile situation. If tourism continues to decline, and with it the inflow of foreign currency into the country, meeting the government’s external debt service obligations during the remainder of the year will become increasingly difficult.

It is possible that the government and the MMA are conserving a larger share of the foreign currency that enters the banking system to meet upcoming external debt obligations. If so, less foreign currency would be available for market intervention through commercial banks, resulting in tighter access for businesses and individuals. However, this remains speculative until the MMA publishes its 2026 foreign exchange intervention data.

The main stressor appears to be the demand for the available foreign currency to service external debt obligations, which is directly linked to persistent fiscal deficits and rising public expenditure.

The overall balance, representing the difference between government revenue and expenditure, is projected to be MVR8.84 billion in 2026. While state revenue has been bolstered through higher tax rates and other revenue measures, expenditure has continued to rise every year and is projected to be at MVR 49.21 billion in 2026, up from around MVR13 billion in 2012, an increase of 278 percent.

The deficit in 2026 is proposed to be financed through MVR16.81 billion in foreign financing, and MVR9.45 billion in domestic financing. This creates a continuous cycle.

Borrowing finances today’s deficit, but tomorrow those borrowings become external debt service obligations, placing further pressure on the foreign currency flowing into the country.

The solution, then, is relatively straightforward, at least in principle: reduce government expenditure and, with it, the need to finance persistent fiscal deficits. This is not a quick fix. It is a medium-to-long-term measure, and the benefits are only likely to become apparent over several years. However, inaction today in implementing fiscal reforms will only allow the current situation to deteriorate further.

The question the government needs to ask itself, and the people, is whether a country with a population of just over 500,000 people needs over 35,000 civil servants and hundreds of political appointees, whether subsidies should continue to be applied across the board, and whether scarce public resources should continue to prioritise more buildings and other physical infrastructure when some of the country's greatest needs lie in the softer aspects of development, such as improving the quality of public services.

When resources are limited, governments have to make difficult choices about priorities.

Does the Maldives need a new international-standard drug rehabilitation centre capable of catering to 500 individuals, or should the immediate priority be investing in quality professionals, strengthening treatment programmes, and ensuring that existing facilities are safe and provide the rehabilitation services people need? Do we need an airport in every atoll, or two or three, when a fully functioning airport is just about 10–15 minutes away by speedboat? Do we need the physical infrastructure for a cancer hospital now, or should the priority be ensuring that even the basic treatments are consistently available within existing hospitals?

Do we need a whole new company dedicated to importing medicines, and thereby delaying a solution and incurring the cost of establishing and getting this new company up and running, when the State Trading Organisation (STO) already has the framework to import and the network to distribute medicines? Why can’t we ensure that existing hospitals have the medicines required for life-saving treatment without making the families of patients run around from one pharmacy to another checking on the availability of medicines?

And then there is Aasandha, which on paper provides universal coverage and consumes a large share of government expenditure, yet there are still hundreds of individuals seeking additional assistance for treatment, either in Male’ or abroad. The issue may not simply be how much the government spends, but whether scarce public resources are being directed to where they deliver the greatest benefit.

These are difficult questions, and every administration has faced them. Making those choices is never politically easy. However, responsible fiscal management requires governments to prioritise spending, particularly when resources are limited. At the end of the day, the people we elect to lead the country must ensure that public resources are used in ways that best serve the people who elected them.

The shortage of US dollars is not simply a banking problem or a foreign exchange problem. It is a symptom of broader fiscal choices made over many years. Until those choices begin to change, the question that opened this article, “where can one obtain US dollars at the official exchange rate?”, is one that many individuals and businesses in the Maldives are likely to keep asking.