The Maldives Monetary Authority (MMA) has increased its US dollar support to local banks by 10 per cent to enhance foreign exchange availability for businesses engaged in imports and other essential transactions.

In a statement issued to local media on Tuesday, the MMA said the decision is aimed at improving access to foreign currency for businesses via Telegraphic Transfers (TT) and Letters of Credit (LC). According to the central bank, the move will enable banks to provide stronger support to small and medium-sized enterprises (SMEs), which are often the most affected by foreign exchange shortages.

The increased dollar allocation is expected to facilitate a rise in the proportion of foreign currency available to SMEs, from the current 30 per cent to 40 per cent. The MMA added that it intends to raise this figure to 50 per cent in the future.

The central bank also noted that, under the Foreign Currency Act, foreign currency-earning businesses are now required to sell 90 per cent of their earnings to the MMA. A portion of this is redistributed to local banks to improve system-wide liquidity and support the private sector’s foreign exchange needs.

Banks are now better positioned to supply dollars for a range of purposes, including imports, medical needs, and essential goods.

This announcement follows a separate measure introduced by President Dr Mohamed Muizzu on Monday, allowing USD 2,000 in foreign exchange to be released through banks for individuals seeking medical treatment abroad via the National Social Protection Agency (NSPA), and USD 1,000 for those covering expenses independently.

The Foreign Currency Act, introduced by the current Administration, has led to an increase in dollar inflows into the central bank via the local banking system. The MMA reported that 60 per cent of these inflows are now being used to strengthen official reserves, which continue to improve on a monthly basis.

Members of the public and private sector stakeholders have expressed hope that the reforms will improve access to US dollars at official bank rates, reducing reliance on the parallel market.