Maldives central bank puts squeeze on dollar black market

Maldives central bank has devised a new policy which has put the squeeze on the intense black market for US dollars.

Maldives Monetary Authority (MMA) has begun selling dollars to state owned and private businesses which has invariably led to a huge drop in demand for dollars on the black market.

The official exchange rate for the dollar is MVR15.42 in the Maldives with it being illegal to exchange dollars at a higher rate. Despite the cap, black market rates for the dollar used to be as high as MVR17 previously, but the new move has caused a significant drop in the rate to as low as MVR16

MMA spokesperson Mansoor Zubair told Avas that though dollars were sold previously to companies as well, the central bank has added more companies to the list recently.

"We used to sell to a couple of companies earlier. However, we currently sell dollars to multiple companies importing goods. The positive effects of this change are currently being observed," Mansoor said.

According to reports, the Finance Minister has instructed government companies to only procure dollars through the MMA.

No comments have been given by the Finance Ministry over the new policy thus far.

Despite the decrease in the black market for dollars, the demand for dollars look to be increasing before the month of Ramadan as companies rush to bring in new stock ahead of the holy month which begins next month.

The Vice President of the Maldivian National Chamber of Commerce and Industry (MNCCI), Ismail Asif also noted the squeeze on the dollar black market adding that local businesses had more access to US dollars curbing the dependency on the black market.

Opinion of businesses

Companies behind the majority of imports to the Maldives also noted the ease in procuring dollars after the recent policy change.

The Chairman of the Lily company, the largest importers into the Maldives, told Avas that procuring dollars was now easier than before, and noted that this was due to the positive changes enginerred by the government.

He further noted that this change would likely help reduce prices of some products during Ramadan.

An official of Red Wave, the widest retailer of goods within the Maldives, however attributed the change to the recent low demand for goods.

"If we can't sell then imports would fall won't it? So naturally the demand for US dollars would drop. So it only appears that the black market rate for US dollars has fallen. Sales are down nearly 20-30 percent," the official explained.

The government has undertaken many efforts to lower the black market for dollars, including the establishment of a system at Velana International Airport to provide dollars for locals traveling abroad.