What the $? - A Look at the Maldives Dollar Situation
If you, like me, need to buy dollars occasionally from the market, you might know that the $ is not exactly cheap right now. Which seems a bit strange, it’s the start of the high season, there should be more money coming into the country than in August, for example, two months into the dip in arrivals. But that’s not how it is – the country’s seeing a grossly inflated dollar value, almost 3MVR more than the official rate at the time of writing. What’s going on?
It's demand and supply, someone might say, and they’d be right. But what’s causing the supply shortage? Is it really because the Bangladeshis are wiring a lot of money out of the country? But then, where’re all the receipts of tourism, our biggest cash-cow? Where are all them dollars? Wouldn’t that offset whatever money the Bangladeshis send out?
And just how much money do expatriates send out to their families anyway?
Here are some stats from the Maldives Monetary Authority (MMA)’s statistics database https://database.mma.gov.mv/
To put these numbers in comparison, the remittance in 2022 ($556.6 million) is greater than the total TGST that the government received that year which is $420 million. That’s a lot of money flowing out of the country, for certain. You could definitely build a long, long bridge to Gulhee Falhu with this kind of cash. An expert I spoke to says the remittance issue points towards structural problems within our labour and education systems. What they meant was maybe the labour constraints aren’t rigid enough, and maybe the education system needs to prep students for work in those (skilled) sectors dominated by expatriates – finance for example. Another way you could think about it is that that $550 million contributes to the cost of production of an economy worth about $6 billion. So in the end, with that $550 million, we help create something worth 12 times as much. A textbook case of win-win, at least numerically speaking. Surely taking those dollars out of the economy would put a dent in dollar availability though, someone might say. They’d be right. But that’s not the real culprit. See, $550 million is only a fraction of the revenue of our largest industry. If the total TGST was $420 million last year, then we can extrapolate the value of that industry from that figure, which is about $3.5 billion. That’s seven times the money that’s remitted by all expat workers. And a finance expert said this is likely not the real value, just the reported value, and businesses love to underreport their earnings to tax authorities. How much of that $ enters the market? Our expert thinks resorts only inject the amount that needs to be exchanged to conduct essential business and for tax purposes. The vast majority of it, they estimate some 60%, moves outside the system.
Let’s do some math. Sixty percent of $3.5 billion is $2.1 billion. We can assume at the very least that this amount is made with resources within the country.
Some people like to talk about expats, they are always worried about beyrumeehun trying to steal our jobs. On top of this there are a lot of expatriate dollar traders, money exchangers, which will only cement their beliefs.
But what they ignore, to their peril (I think), is that vast orange bar that resort owners take to their banks abroad. So much public attention, diverted and focussed through mainstream media, falls on the blue strip. Sure, it’s a substantial amount but it is completely dwarfed by that tower of orange. And we as a people need to be talking about this enormous orange chunk a whole lot more, first and foremost.
If you put two and two together you may think the dollar shortage actually exists intentionally. It’s a stream of supplementary revenue, a way to mitigate costs. As an import dependent nation, the Maldives will always need those dollars. And the vast majority of the dollars we generate never see the inside of our economy.
Why isn’t the government doing anything about this? Why can’t they have a law that says all transactions in the country need to be done in MVR, for instance? Well, such a regulation exists, but for various reasons, it also contains loopholes to be exploited by resorts, effectively turning them into money exchangers.
But this isn’t something that’s unique to the Maldives and there are some ways out. All dollars earned from tourism exports could be kept in the Maldives banking system, whether in dollars or as rufiyaa. They could be kept for a set period of time in the system, so banks can carry out financial activities knowing they will not have to pay out the customers for a while. Meanwhile, the funds would keep getting replenished. The dollar shortage may then be a thing of the past.
In any case, there needs to be a push from the people. We the people. And a great, forceful, unrelenting push until we get our way. Say what you will about us but we are very political, and we don’t take shit from people. Not even presidents. So, check facts, and if my little story’s right, go spread the word.