The Maldives’ request for an extension of an Indian currency swap facility has run into problems because of the rules and regulations governing the scheme, such as the need for a “cooling off” period between drawals, people familiar with the matter said.
India has played a key role in helping the Indian Ocean archipelago cope with a balance of payments and sovereign debt crisis in recent years, providing both credit lines and assistance under the SAARC Currency Swap Framework. The short-term financial support, including a $400-million currency swap facility provided in October 2024, helped the Maldives address liquidity stresses.
The people said the currency swap facility of October 2024 was rolled over two times despite stringent rules and requirements, and the Indian side also rolled over two interest-free $50-million treasury bills in May and September 2025 for an additional year. The people described these measures as an “exceptional gesture” to a close neighbour.
The Maldives recently asked India to extend the currency swap facility again. However, the people said that while the Indian government is examining this request, the existing rules and terms of the currency swap facility, such as the need for a cooling off period between two drawals and the maximum number of roll-overs permitted, make it “extremely difficult” to be considered in a favourable manner.
Relations between India and the Maldives nose-dived some years ago when President Mohamed Muizzu came to power on an “India Out” campaign and sought to move his country closer to China. However, ties improved after Muizzu was among regional leaders invited to Prime Minister Narendra Modi’s inauguration in 2024.
{{/usCountry}}Relations between India and the Maldives nose-dived some years ago when President Mohamed Muizzu came to power on an “India Out” campaign and sought to move his country closer to China. However, ties improved after Muizzu was among regional leaders invited to Prime Minister Narendra Modi’s inauguration in 2024.
{{/usCountry}}The thaw continued with Muizzu’s subsequent visit to India in October 2024, when India agreed to provide support of more than ₹6,300 crore to the Maldives to tide over a foreign exchange crisis. This included the roll over of treasury bills worth $100 million and currency swap arrangements for $400 million and ₹3,000 crore.
The Maldives is currently going through a stressful economic situation that has been exacerbated by the impact of the West Asia conflict. Tourist flows, especially from rich Gulf states, have been significantly reduced and energy costs have risen. The Maldives’ ability to raise further loans may be adversely impacted in this situation, the people said.
Adding to the fragility of the financial situation is debt repayments of almost $1 billion in April, including $500 million for Sukuk Bonds and $400 million for the currency swap with India. The Maldivian government announced on April 1 that the Sukuk Bonds worth $500 million, along with interest payments of $24.68 million, were repaid from forex reserves and the Sovereign Development Fund.
If India is not in a position to accede to the Maldives’ request for extending the currency swap facility, this could further exacerbate the financial challenges facing the economy in the short to medium term, the people said.