Maldives in discussion with India to pay in local currency for imports: Minister

Male: The Maldives is currently discussing with India if the island nation can make payments for its imports from the country in Maldivian Rufiyaa, a senior minister has said.

A similar arrangement is also being worked out for imports of goods from China, Minister for Economic Development Mohamed Saeed said and noted that annually, Maldives imports goods worth USD 780 million and USD 720 million from India and China respectively.

According to the news portal Edition.mv, Saeed was speaking at an event held on the island of Maavah during President Mohamed Muizzu’s visit to Laamu Atoll ahead of parliamentary elections on April 21.

He stated that if the ruling party were able to secure a majority in Parliament, they would be able to bring “the dollar rate back down to official market values within approximately two years.”

Saeed said his party was now getting all signals that “there was a possibility to make non-dollar payments for all of these massive import arrangements.”

International trade between two countries in local currency is a mutually beneficial mechanism as it helps in saving each other’s foreign exchange reserves. Moreover, the move will mark a significant shift away from the dominant use of the US dollar in international transactions.

In July 2023, Government of India had declared that Maldives was among the 22 countries that had been permitted by the Reserve Bank to open Special Rupee Vostro Accounts (SRVAs) as part of efforts to promote bilateral trade in local currencies.

The aim was to ensure that goods imported from India could be paid for in Maldivian Rufiyaa, Saeed said, and added, “Maldives was not a country to break ties with any other nation, and that we are a country that is open to trade.”

“Even if we get just the parliamentary majority, the Maldivian Rufiyaa will strengthen by 30 or 40 per cent against the dollar. What is the result? The dollar rate will fall below MVR 15.42 in the future,” Saeed added.

The minister also revealed that Maldives had invited the Governor of the Central Bank of China to visit Maldives and that efforts are underway to sign a currency swap agreement between the two countries.

“Under the agreement, even if trade facilitation will receive only half of the USD 720 million, Chinese imports can be paid for in Yuan or Maldivian Rufiyaa,” Saeed was quoted as saying.