On August 31, 2026, President Mohamed Muizzu enacted the First Amendment to the Foreign Currency Act, along with six additional legislative measures. This amendment took effect the following day, September 1, 2026. Hidden within this busy legislative period is a modification that has the potential to significantly alter the competitive landscape of tourism in the Indian Ocean region.
The most notable change is a substantial increase in the mandatory foreign-currency conversion requirement for Category A tourism establishments, including hotels, resorts, and tourist vessels, which has surged from 20% to 40% of their monthly gross sales. Additionally, the amendment removes the previous per-arrival payment option (set at USD 500 per tourist), raises the revenue threshold for “high-income entity” classification from USD 15 million to USD 25 million, and mandates that businesses receive prior approval from the Maldives Monetary Authority (MMA) for foreign-currency transactions related to goods and services, with limited exceptions for salaries, dividends, and related-party payments.
While each of these changes may seem like minor adjustments to monetary policy, collectively, they represent one of the most significant regulatory shifts in Maldivian tourism in decades, a development that rivals in the region should closely monitor.
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Understanding the significance of the 40% conversion rate requires an insight into the unique economic dynamics of Maldivian resorts. Unlike hotels in Colombo, Phuket, or Victoria, which typically engage in domestic supply chains while serving international guests, Maldivian resorts function more as offshore entities that depend heavily on imported goods.
Industry estimates suggest that around 90% of a resort’s operational expenses are incurred in US dollars. This includes costs for imported food and beverages, spare parts, fuel, insurance, and loan repayments on foreign currency-denominated development loans, as well as salaries for both expatriate and local staff, many of whom receive payments in dollars. In essence, resorts operate primarily in dollars, converting them to Rufiyaa only for specific domestic obligations such as government fees and local taxes.
This creates a significant challenge with the new regulation. In many emerging markets, mandatory currency conversion can be bothersome, but the local banking systems often facilitate a return of the converted currency back into the economy. However, the Maldives lacks such a mechanism. Local banks do not typically issue Letters of Credit or reliably sell dollars back to resorts for imports, unlike banks in Sri Lanka or India that support their exporters in this way. Thus, once a resort’s dollars are converted to Rufiyaa under this new rule, they are effectively unusable for most operational costs.
While a 20% conversion requirement was already burdensome, increasing it to 40% shifts the situation from a mere inconvenience to a significant structural threat. Resorts that must convert 40% of their gross sales into a currency that cannot be utilized for most of their expenses are not merely incurring a tax; they are facing a substantial loss on that portion of their revenue. For mid-market resorts, which already operate on tight margins due to rising taxes and fees, this could mean the difference between remaining operational and shutting down.
The added requirement for prior approval from the MMA exacerbates the situation. Previously, resorts could transact with suppliers relatively freely, but now every foreign-currency transaction requires MMA authorization, unless it falls under the limited exemptions for salaries and dividends. This creates a liquidity bottleneck at a time when resorts need flexibility to navigate dollar shortages.
This isn’t the first time the industry has raised concerns. When the original Foreign Currency Act was introduced in 2024–25, which included the 20% or USD 500-per-tourist requirement, over 50 resort operators communicated directly with the MMA and the President’s Office, warning about the adverse effects of such uniform dollar quotas. The Maldives Association of Tourism Industry (MATI) labeled the initial rules as “unacceptable.” Despite these warnings, the government proceeded, and by early 2026, the MMA Governor hinted that the conversion rate might be lowered. Instead, it has now been doubled.
The implications of this situation extend beyond the Maldives, raising questions about regional competitiveness. In contrast, Sri Lanka has mandated that hotels accept payments from foreign guests only in foreign currency since 2022. However, this currency goes directly into the hotel’s Business Foreign Currency Account, allowing operators to pay international suppliers and manage their liquidity. In this environment, tourism revenues in Sri Lanka have been on the rise, reaching approximately USD 2.66 billion in the first ten months of 2025, as the country has repositioned itself to attract higher-end travelers.
Similarly, Seychelles and Thailand, despite differing regulatory frameworks, allow tourism sector revenue to remain accessible for funding essential operational costs in hard currency. Neither country imposes a blanket conversion mandate of 40% of gross sales without a functioning mechanism for currency repatriation.
For international resort operators and management firms that can allocate development capital across the Indian Ocean and Southeast Asia, the decision-making process is pragmatic, not sentimental. If the Maldives makes it structurally challenging to operate in the currency needed for its tourism sector, while comparable destinations do not, investment and new developments will likely shift accordingly. This reasoning applies to existing resort companies determining where to allocate expansion capital and to high-end tour operators directing their focus toward locations where their partner properties are not experiencing currency mismatches. The effects of these decisions may not be seen immediately but will manifest in occupancy rates, average daily rates, and the location of future five-star resort developments.
For destination marketing organizations and private operators in Sri Lanka, Seychelles, and Thailand, this presents a real opportunity. The emphasis should be on currency stability, rather than merely pricing. Investors in resorts and management firms are increasingly focused on the ability to operate in the currency they earn. A destination that can effectively communicate, “your dollar revenue remains usable as dollar revenue,” has a compelling argument that no amount of marketing expenditure in Malé can currently counter.
The competitive strategy should focus on capital allocation rather than just tourist numbers. The immediate opportunity lies less in attracting existing visitors from the Maldives—since the offerings are not identical—and more in capturing the next wave of resort development and brand expansion decisions currently being made by companies evaluating where to establish new properties.
Timing is critical. Comments made by the MMA Governor in early 2026 indicate that even the Maldivian authorities recognize that this rate may not be sustainable and could ultimately be reconsidered. Any competitive advantage derived from this disparity has a limited duration and should be pursued with urgency rather than seen as a permanent edge.
Policy stability has become a selling point in itself. A regulatory environment that has rapidly increased a conversion mandate within approximately eighteen months of its initial introduction, despite documented industry objections, signals a lack of predictability that rival jurisdictions can leverage, provided they can highlight their own records of consultation and stability.
The Maldivian government’s underlying aim of building a robust reserve of foreign currency and reducing reliance on informal exchange channels is a valid objective. However, the policy tools must align with the economic realities they seek to regulate. A conversion mandate that assumes resorts can operate effectively using Rufiyaa—when nearly everything they require is imported and there is no functional dollar-recycling mechanism in the banking system—does not address the reserves issue; instead, it shifts the burden onto the operators responsible for generating those reserves.
Until the Maldives establishes a viable system for resorts to access foreign currency for legitimate operational needs—whether through Letters of Credit, a functional interbank foreign exchange market, or negotiated exemptions that reflect actual dollar cost structures—the divide between the 40% conversion requirement and the 90% dollar-cost reality of running a resort will continue to grow. Each month this discrepancy endures strengthens the case for Colombo, Victoria, and Phuket to present a more appealing narrative to investors contemplating where the next prestigious island resort should be built.
The author, Jithendra Antonio, is a consultant specializing in data analytics with a focus on Sri Lanka’s future direction, alongside expertise in sustainable energy, ESG, investments, and telecommunications. He can be contacted at jithendra.antonio@gmail.com.
