Economic Minister Mohamed Saeed has raised concerns about the annual outflow of approximately USD 500 million in remittances sent abroad by expatriate workers in the Maldives. Speaking on the state media’s ‘Raajje Miadhu’ programme on Tuesday evening, Minister Saeed emphasised that this significant outflow of foreign currency is not a new issue but a persistent challenge the country has faced for years.
The high remittance levels have a substantial economic impact, exacerbating the Maldives’ ongoing foreign exchange crisis. The constant outflow of foreign currency reduces the dollar reserves needed to stabilise the local currency and support essential imports.
The lack of stringent measures has contributed to the current economic strain, where the country is struggling with a shortage of US dollars. Minister Saeed pointed out that the Maldives spends between USD 500-600 million annually on fuel imports alone, a significant drain on foreign reserves. He highlighted the administration’s ongoing efforts to reduce this expenditure, including a project to develop a solar city and promote renewable energy, which is expected to cut down on fuel imports.
To address the foreign exchange issues further, Minister Saeed also revealed plans to start making payments for imports in Chinese and Indian currencies, beginning with India in the near future. This initiative is aimed at reducing the country’s reliance on the US dollar and easing the pressure on dollar reserves.
The foreign currency leakage is further compounded by the presence of a large population of migrant workers, many of whom are undocumented. The Minister noted that the government has been actively tackling this issue, with Maldives Immigration deporting 3,222 migrants between November 2023 and August 2024. The unchecked flow of remittances from these workers continues to put pressure on the country’s foreign reserves.
With these challenges, the Maldives is finding it increasingly difficult to maintain a stable supply of foreign currency, leading to a depreciating value of the Maldivian Rufiyaa against the dollar. This depreciation has broader economic implications, affecting the cost of imports and, consequently, the cost of living for Maldivian citizens. As demand for the dollar outstrips supply, local businesses are also facing difficulties in securing the foreign exchange needed for international transactions.
Minister Saeed’s comments come at a time when the government is exploring multiple strategies to stabilise the economy and manage the dollar crisis more effectively. In addition to the proposed remittance tax, the administration is considering broader economic reforms, such as amendments to the Income Tax, Pension, MIRA, and GST Acts. These amendments will require businesses earning in foreign currency to pay customs duties, income tax, and pensions in US dollars, aiming to increase foreign reserves and alleviate pressure on the exchange rate.
As the Maldives continues to grapple with its foreign currency challenges, the need for effective economic policies has never been more critical. The measures proposed by Minister Saeed and the government aim to address the root causes of the foreign exchange crisis, balancing the need for sustainable growth with the immediate pressures of maintaining economic stability.
