Maldives and India sign US$400m currency swap deal

The central banks of India and Maldives on Monday signed a bilateral currency swap agreement worth up to US$400 million.

India agreed to increase an existing swap arrangement as part of a US$1.4 billion economic package pledged in December as the change of government heralded a reset of relations after the historically close ties were strained under the pro-China former administration.

Under the swap facility, the Maldives central bank can draw up to US$400 million after issuing a guarantee for the equivalent amount in local currency.

The facility was agreed under the ‘Framework on Currency Swap Arrangement for SAARC Countries,’ an arrangement India has with SAARC member countries to help manage foreign currency reserves. The Reserve Bank of India also signed a currency swap deal worth US$700 million with the Sri Lankan central bank in 2016.

According to a press statement by the Maldives central bank, the agreement was signed by Maldives Monetary Authority Governor Ahmed Naseer and RBI Executive Director Shri M Rajeshwar Rao.

The Maldives previously secured a currency swap deal worth US$100 million to shore up depleted reserves in December 2016.

The country’s international reserve was severely depleted after the central bank bought a US$140 million bond from the state-owned airport company to help raise funds to compensate Indian developer GMR, which was owed US$271 million in damages for the cancellation of its contract to develop the main international airport.