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India signed a $750 million currency swap agreement with the Maldives to help address the island nation's foreign currency issues.
This agreement was made during a meeting between Indian Prime Minister Narendra Modi and Maldivian President Mohamed Muizzu in New Delhi.
This arrangement, signed under the South Asian Association for Regional Cooperation (SAARC) Currency Swap Framework, will be available until 2027 and facilitates trade and payments between India and the Maldives in their respective currencies
Additional agreements include the launch of the RuPay card in the Maldives and the handover of 700 houses built with Indian assistance
What is Currency Swap Agreement
A currency swap agreement between two countries is a contract to exchange currencies with predetermined terms and conditions for liquidity support.
Central banks and governments engage in currency swaps to address immediate foreign exchange liquidity requirements, helping to stabilize their economies in the short term.
These agreements help avoid Balance of Payments crises until longer-term solutions are in place.
These swap operations carry no exchange rate or other market risks as transaction terms are set in advance.
Future Economic Collaboration
India and the Maldives plan to enhance cooperation in trade using national currencies.
There are discussions on a potential Free Trade Agreement.
Other Maldivian requests, like debt repayment waivers and further economic assistance, will be evaluated in the near future.
A joint “vision statement” has been released to develop a comprehensive economic and maritime security partnership.
Infrastructure developments include a newly inaugurated runway for the international airport on Hanimadhoo island and support for the Maldives' Coast Guard.
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