RBI and Maldives Monetary Authority Sign $400 Million Currency Swap Agreement

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The Reserve Bank of India (RBI) and the Maldives Monetary Authority (MMA) have signed a currency swap agreement under the SAARC Currency Swap Framework for 2024-2027. This agreement allows the Maldives to access up to $400 million under the US Dollar/Euro Swap Window and Rs 30 billion under the Indian Rupee (INR) Swap Window.

It will remain in effect until June 18, 2027, offering short-term foreign exchange liquidity for the Maldives in times of balance of payments stress. The SAARC Currency Swap Framework, launched in 2012, was designed to assist SAARC member nations in managing foreign exchange shortages until long-term solutions are arranged.

Key Details

Agreement Duration: Valid from 2024 to June 18, 2027.
Currency Access: $400 million (USD/Euro) and Rs 30 billion (INR).
Framework Origin: Established in 2012 to address short-term foreign exchange crises in SAARC countries.

Link to the Past and Present

The SAARC Currency Swap Framework, introduced in 2012, has continued to provide crucial financial relief to member nations facing temporary economic pressures. This new agreement between the RBI and MMA highlights the ongoing financial cooperation between India and Maldives, ensuring stability and liquidity in the region amidst potential economic challenges.

SAARC Currency Swap Framework: Key Points

Establishment: Launched on November 15, 2012, by the Reserve Bank of India (RBI).

Purpose: Provides short-term foreign exchange liquidity to SAARC member countries facing balance of payments issues or foreign exchange shortages.

Beneficiaries: All SAARC member nations, including Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka.

Amount: Allows member nations to access financial support in the form of currency swaps for up to $2 billion.

Currency Options: Swaps can be availed in USD, Euro, or Indian Rupee (INR) to help stabilize foreign reserves.

Validity: Agreements typically have a defined term, often renewable, and aim to offer financial backstop until more permanent solutions are established.

Significance: Strengthens financial cooperation and economic stability in the SAARC region.

Piyush Shukla