Under the SAARC Currency Swap Framework for 2024-2027, the Reserve Bank of India (RBI) announced entering into a currency swap agreement with the Maldives Monetary Authority (MMA), granting access to up to $400 million through the US Dollar/Euro Swap Window and ₹3,000 crore through the Indian Rupee (INR) Swap Window. The agreement was signed in New Delhi on Monday, as per a statement issued by the RBI yesterday. The arrangement is set to be effective until June 18, 2027.

Originally established on November 15, 2012, the SAARC Currency Swap Framework was designed to provide short-term foreign exchange liquidity to SAARC member nations facing balance of payments difficulties or foreign currency shortages, serving as a stopgap until long-term financing is arranged, it adds.

Mohamed Muizzu, the President of the Republic of Maldives, was welcomed by India’s President, Droupadi Murmu, at Rashtrapati Bhavan on October 7. During the event, President Murmu emphasised the importance of the Maldives as a close ally and key partner for India in the Indian Ocean region.

Narendra Modi, the Prime Minister of India highlighted the Maldives' special place in India’s ‘Neighbourhood First’ policy and its SAGAR Vision. He pointed out that India is one of the Maldives' leading trading partners and highlighted the potential for expanding cooperation in areas like digital payments and emerging technologies.

The President of the Maldives expressed gratitude to India for its prompt financial assistance, including the extension of $100 million worth of Treasury bills (T-bills) subscribed by SBI in May and September 2024 for a further period of one year, which provided crucial financial relief to the Maldives. He also recognised India's ongoing role as the Maldives' 'First Responder' during times of crisis, referencing India's previous support during the 2014 water crisis in Malé and the Covid-19 pandemic.

Recognising the untapped potential for bilateral trade and investment, both governments agreed to start discussions on a Bilateral Free Trade Agreement, focusing on trade in goods and services. They also decided to implement a system for settling trade transactions between India and the Maldives in their local currencies, aiming to strengthen trade ties and reduce reliance on foreign currencies. Additionally, steps will be taken to promote bilateral investments, foster closer cooperation between business chambers, share information on investment opportunities, and improve the ease of doing business. Efforts will also be made to enhance tourism between the two countries through joint marketing campaigns and collaborations, as per the release.

Both countries agreed to collaborate on digital and financial initiatives, focusing on Digital Public Infrastructure (DPI) through the implementation of India’s Unified Payments Interface (UPI), Unique Digital Identity, Gati Shakti Scheme, and other digital services aimed at improving e-governance and service delivery for the people of the Maldives. They welcomed the introduction of the RuPay card in the Maldives, which will facilitate easier payments for Indian tourists, and expressed a commitment to provide similar services for Maldivian nationals travelling to India, it adds.

Currency Swap Pact

RBI, Maldives Monetary Authority sign $400 mn currency swap pact