India, Maldives ink currency swap agreement, to initiate talks on FTA

India and Maldives on Monday signed currency swap agreements worth $400 million and Rs 3,000 crore to overcome a foreign exchange crisis in the island nation while separately, New Delhi will firm-up its strategic toe-hold on the islands by ‘supporting’ provisions of defence platforms, enhanced surveillance and new radar systems.

India also rolled out infrastructure projects for ports, airports, housing, hospitals, roads networks, sports facilities, agriculture, fish-processing, schools, water and sewerage while the two-sides agreed to hold discussions on a Free Trade Agreement (FTA).

The currency swap agreements were signed and documents exchanged after Prime Minister Narendra Modi and Maldivian President Mohd Muizzu held their first bilateral meeting on Monday. Muizzu said, “Maldives will remain a true friend, committed to our shared vision of peace.”

The promise of a remaining a “true friend” comes eleven months after Muizzu rode to power in his country in November last year using ‘India out’ campaign. On assuming power, he had then asked Indian military personnel operating helicopters to leave. He then opted to make first-bilateral visits to Turkiye and China, breaking away from the traditional first-visit to India. Muizzu is on his first bilateral visit to India from October 6 to October 10.

The twin-currency swap agreements will allow Maldives to use the dollars for foreign exchange needs and use Rs 3,000 crore worth of Indian currency and repay in their own currency. This aid comes in the back drop of State Bank of India – in May and September — rolling over $100 million worth of payments due from Maldives.

At the strategic level, Modi said, “We will continue to support in training and capacity building of Maldives national defence forces (MNDF)”. The Ministry of External Affairs put out details, saying India would support Maldives with provisioning of defence platforms and assets to augment capabilities of MNDF. Also, India will help in enhancing surveillance and monitoring capability with radar systems and equipment. India will increase capacity building and training slots for MNDF, Maldives police services (MPS) and other security organizations of the island nation.

Modi virtually handed over 700 housing units made in Maldives with New Delhi’s money. Modi and Muizzu lauded the use of ‘RuPay debit cards’ in the island nation and virtually opened the extension of a runway at Hanimaadhoo International Airport at Maldives. The Indian PM said India’s infrastructure projects would focus on “greater male connectivity project, support the new commercial port at Thilafushi”. Work on the Ekatha Harbour project started in May 2023, months before Muizzu was voted to power.

India will also take up water and sewerage projects on six additional islands in Maldives — earlier such projects were undertaken on 28 islands. In all 30,000 people will be impacted. Modi said, “India will focus on setting up an agricultural economic zone and a fish processing unit.”

The two leaders agreed to comprehensively transform the bilateral relationship to a comprehensive economic and maritime security partnership. This will encompass development cooperation, trade and economic participation, partnerships, digital and financial initiatives, energy projects, health cooperation as well as maritime and security cooperation.