New Delhi: India and Maldives have signed a currency swap agreement of $400 million and Rs 3,000 crore, in a relief to the island country facing a liquidity crisis with only about a month and a half of foreign exchange reserves left in its banks.
The two countries have also agreed to a Comprehensive Economic and Maritime Security Partnership vision, during Maldivian President Mohamed Muizzu’s state visit to New Delhi Monday.
“We have always given a preference to the priorities of the people of Maldives. This year, SBI [State Bank of India] rolled over $100 million treasury bills of Maldives. Today, as per the needs of Maldives, a currency swap agreement of $400 million and Rs. 3,000 crores was signed,” said Prime Minister Narendra Modi in a press statement after the discussions with Muizzu.
Ties between the two countries, which hit a rough patch at the start of Muizzu’s tenure as president in November 2023, has seemingly been revived, with India extending budgetary support to the island archipelago struggling with a balance of payment crisis.
In September, the rating agency Moody’s downgraded the Maldivian economic outlook due to its worsening liquidity situation.
Maldives, according to the rating agency, had only $437 million in foreign exchange reserves at the end of August, which would cover only a month and a half worth of imports for the island archipelago.
The currency swap agreement with India offers the Maldivian Monetary Authority (MMA) a back-stop in short-term credit to keep its imports flowing, while giving the country’s central bank to work out a longer term agreement for shoring up its foreign exchange reserves.
Muizzu, who is on his first state visit to India, will continue to Agra, Mumbai and Bengaluru and will return to Maldives on 10 October.
The Indian prime minister also announced that the two leaders agreed to open talks for a Free Trade Agreement—an agreement the Maldivian president hoped would be concluded quickly.
The two leaders also agreed to launch RuPay branded credit cards in the Maldives as well work on the launch of the Unified Payments Interface (UPI) to strengthen the economic cooperation between the two neighbours.
During the discussions, the two countries agreed to open new consulates, with India looking at Addu for its second consulate in the island archipelago, while Maldives looking to open one in Bengaluru.
It should be noted that in 2021, under the previous dispensation of Ibrahim Solih, which was considered more friendly to India, discussions for a consulate in Addu was announced.
However, the local authorities in Maldives’ second most populated region had opposed the opening of an Indian consulate at the time, accusing New Delhi of attempting to “colonise” Addu city, according to reports.
Members from Muizzu’s coalition at the time raised public concerns of New Delhi’s growing influence in Maldives, which eventually became a part of the “India Out” movement across the island archipelago.
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Maritime security
As a part of the discussions, a vision document on comprehensive economic and maritime security was also agreed to by the two leaders. In the early months of his tenure, the Maldivian president took steps to reduce India’s role as a maritime security partner—a role that New Delhi had played for many years.
“We agreed on a comprehensive vision document charting the course of our bilateral relationship. A vision for a comprehensive economic and maritime security partnership will encompass development cooperation, trade and economic partnerships, digital and financial initiatives, energy projects, health cooperation as well as maritime and security cooperation,” Muizzu said in a statement to the press.
In January, Muizzu had inked a $37 million deal with Türkiye for military drones, which would patrol its high seas—something India had done in partnership with the Maldivian armed forces till that point. Furthermore, the Maldivian president also asked India to replace its unarmed military soldiers present within his country operating three aviation platforms by 10 May.
New Delhi replaced the unarmed troops with a technical team, who continue to operate the platforms in partnership with the Maldivian defence forces.
On Monday, PM Modi announced that India will be aiding in the training and capacity building of the Maldivian defence forces, showing how the ties have evolved in little less than 10 months. Furthermore, the Indian prime minister added that the two countries will be working together in the realm of oceanography as well.
In 2019, India and Maldives had agreed to a hydrography agreement for five years, which Muizzu allowed to elapse earlier this year.
(Edited by Tony Rai)
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