India and Maldives Boost Ties with $750 Million Currency Swap Deal

India has extended significant financial aid to the Maldives by signing a $750 million currency swap agreement to ease the country’s foreign exchange crisis. This includes a $400 million swap and an additional ₹3,000 crore ($357 million) under the SAARC Currency Swap Framework, available until 2027. The agreement was sealed during a meeting between Prime Minister Narendra Modi and Maldivian President Mohamed Muizzu, who is on a five-day visit to India. Both leaders discussed key economic and security collaborations, adopting a “vision statement” that reinforces their partnership.

Economic Aid and Currency Swap

The currency swap aims to bolster the Maldives’ foreign exchange reserves, currently facing significant pressure due to an external debt of 110% of its GDP, particularly from Chinese loans. The arrangement will help the Maldives manage its forex needs and sustain trade and other economic activities. In addition to the currency swap, India had earlier rolled over treasury bills amounting to $100 million in support of the Maldives’ economic stability.

Bilateral Free Trade Agreement (FTA) Discussions

India and the Maldives agreed to initiate discussions on a potential bilateral Free Trade Agreement (FTA), signaling a further deepening of economic ties. This agreement could serve to counterbalance China’s influence in the region, given Muizzu’s past advocacy for reducing Indian involvement in Maldivian affairs and pivoting towards Beijing.

Strategic Projects and Development

The two sides agreed on a wide range of strategic projects, including the development of a commercial port at Thilafushi island, the refitting of the Maldivian Coast Guard ship, and the expansion of tourism and agriculture in the northern atolls. India also inaugurated the new runway at Hanimaadhoo International Airport and launched the RuPay card in the Maldives to strengthen financial ties.

Security and Maritime Collaboration

Prime Minister Modi emphasized India’s role as the Maldives’ “first responder” in times of crisis, while both nations agreed to collaborate on maritime security. This adds a strategic layer to their partnership, extending beyond economic relations into regional security.

Reconciliation in Relations

Despite recent political tensions and Muizzu’s earlier call for India to withdraw its military personnel, both nations have reconciled to focus on mutual benefits. Foreign Secretary Vikram Misri reaffirmed that the relationship is built on several substantive pillars, with continued cooperation in areas like airport development, transshipment, and bunkering services.