Central bank takes over dollar sales amid shortage

The Maldives Monetary Authority has taken over the sale of US dollars to Maldivians planning to travel overseas, citing difficulties faced by banks to meet high demand during the school holiday season.

Dr Azeema Adam, the central bank’s governor, announced Saturday that the MMA will sell dollars from November 20 to January 7 exclusively to Maldivians who plan to travel within seven days.

The move comes after hundreds queued for hours outside the only Bank of Maldives branch in Malé that sold dollars. Eyewitnesses told the Maldives Independent that queue token numbers were sold for up to MVR500 (US$32) last week.

“There will be no need to queue before nine in the morning or to get in first. If you get into MMA before six, you will certainly get dollars that day,” Azeema assured at a press conference this morning, acknowledging anxiety among the public over the dollar shortage.

Arrangements have been made to ensure prompt service, she added. Counters at the MMA building will be open from 9am to 6pm to check tickets and passports, after which a slip will be issued to collect the dollars on the same day.

A maximum of US$500 will be sold per ticket with a limit of five tickets for each individual buyer, who must also be among the travellers.

After the annual holidays, Azeema said dollars will be sold to travellers from Bank of Maldives counters at the airport’s departure hall.

Schools closed last Thursday and thousands of Maldivians are expected to travel before they reopen in early January.

Despite the central bank taking over dollar sales in the capital, Bank of Maldives branches in the atolls will continue to sell dollars for travellers.

The queue outside the outside the BML Lite branch in Malé meanwhile stretched across the block during the past two weeks. According to eyewitnesses, dollars bought from the bank were also sold in the black market.

Photo from social media

“It is a big problem for people like us who really needs those dollars desperately,” a 30-year-old man in the queue said.

The Maldives has a de facto fixed exchange rate of MVR15.42 per dollar.

Ibrahim Fulhu Rasheed, 57, who was waiting in line Wednesday morning said he first approached a private seller who offered to sell him dollars at the rate of MVR17.50.

“I came here at 3:00am. It’s close to 12 hours now. But I’m finally getting there,” said Rasheed, who was planning to visit his hospitalised wife in India.

A survey conducted by the MMA found that 58 percent of Maldivians travel overseas to seek medical treatment, predominantly in neighbouring India and Sri Lanka.

According to the Bank of Maldives, some US$53 million has been sold as of November 16 for 108,000 tickets.

In August, the MMA instructed banks to sell dollars only to the ticket-holder after reports that the special dispensation was being misused for sale in the black market.

“The bank recognises that this is a period of peak demand for dollars,” a BML spokesman told the Maldives Independent, adding that safeguards are in place to ensure that “genuine travellers are able to access this service”.

The bank has been able to supply dollars both through the MMA’s foreign currency allocation and its own reserve, he said. However, the bank’s sales were insufficient to address the high demand.

The police were meanwhile forced to maintain order at the dollar queue on several occasions in recent weeks as the frustration of angry locals boiled over.

“Some are bringing benches and chairs to sit while waiting, which is illegal because it’s the streets and also because it causes unrest within the dollar queue,” a police spokeswoman said.

Local businesses have also been affected by the dollar crunch. Ahmed Mamdhooh, a small business owner, said he has been buying dollars at the black market rate of MVR17 or higher for the past month to pay for imported goods.

“It’s been ultimately difficult for people like us especially. Because we buy goods using dollars and sell it in Rufiyaa as in most cases in the Maldives,” he said.

The manager of a private publishing company said his business has suffered due to the inability to purchase enough dollars to pay for necessary imports.

“This is high season for us. This is the month when students buy their books for the next school term,” said the manager who wished to remain anonymous.

The dollar shortage has been blamed on the underperformance of the tourism industry as well as government spending outstripping its revenue in the past 10 years.

During last week’s budget debate in parliament, MP Ahmed ‘Redwave’ Saleem of the ruling Progressive Party of the Maldives warned that the black market rate could rise as high as MVR18 next year due to the fiscal deficit.

Speaking to the Maldives Independent, Mahmoud Razee, a former economic development minister, said the government has to spend within its means and reduce debt in order to “avoid a foreign currency crisis”.

Growing public debt, which is expected to reach MVR36.9 billion (US$2.4 billion) or 64 percent of GDP at the end of 2016 due to increased spending on infrastructure projects, is the main cause of the crisis, Razee said.

“The government is acquiring loans from abroad which leads to fewer loans for private businesses. This will have a negative effect on foreign exchange,” he said.

“We don’t have income tax here but rather indirect import tax which leads to inflation and more expenditure. It is a never ending loop.”

The government insists that its policies are spurring growth and job creation, but “the bigger picture speaks for itself,” Razee said.

The positive impact of new jobs and rapid growth would have been evident in the economy, he suggested.

The outflow of income from the multi-billion tourism industry is also a major factor, Razee said. Despite welcoming more than a million visitors each year, he noted that resort profits are not kept at local banks.

“If that money rolls in the Maldives economy it would change a lot. And this can be done if there is genuine political will,” he said.