India has activated the currency swap arrangement to mitigate the impact of COVID-19 pandemic on the financial system of the Maldives and to help stabilise the exchange rate and ease liquidity.
In this regard, India will grant a foreign currency swap facility of USD 150 million to the Maldives Monetary Authority (MMA) under the USD 400 million currency swap agreement signed in July 2019 between the two countries. The decision to activate the currency swap arrangement came a week after the telephone conversation between President Ibrahim Mohamed Solih and Prime Minister Narendra Modi during which India reiterated its commitment to stand by the Maldives in these challenging times.
The USD 400 million currency swap facility is part of the USD 1.4 billion economic package announced by India for the Maldives in December 2018 during the state visit of President Solih. Other components of the USD 1.4 billion economic assistance package include USD 50 million direct budget support which was extended in 2019, subscription of Maldivian Treasury Bills worth USD 150 million by the State Bank of India (SBI) which was completed in 2019 and USD 800 million Line of Credit under which 8 large infrastructure projects have been identified and are in various stages of implementation. Meanwhile, the government of India is also considering extending the validity of the currency swap facility by one year.
Maldives is the only South Asian Association for Regional Cooperation (SAARC) country other than Bhutan, which has been extended USD 400 million currency swap facility by India.