Why is it in the news?
- India signed a $750 million currency swap agreement with the Maldives to help address its foreign currency crunch.
- This arrangement, which includes $400 million and ₹3,000 crore (approximately $357 million), was finalized under the South Asian Association for Regional Cooperation (SAARC) Currency Swap Framework and will be available until 2027, allowing for payments between the two nations in different currencies.
More about the news
- During a meeting in New Delhi, Prime Minister Narendra Modi and Maldivian President Mohamed Muizzu signed several agreements, including the launch of the RuPay card in the Maldives and the handover of 700 houses built with Indian assistance.
- Additional memorandums of understanding were established for cooperation in anti-corruption, policing, judicial training, and sports.
- Muizzu addressed the recent “boycott Maldives” social media campaign, expressing hope for the return of Indian tourists, whose numbers have halved this year. He stated, “India is one of our largest tourism source markets, and we hope to welcome more Indian tourists to the Maldives, allowing for shared growth and understanding.”
- India also agreed to enhance trade cooperation in national currencies and explore a Free Trade Agreement.
- The two nations released a vision statement for a comprehensive economic and maritime security partnership and inaugurated a jointly constructed runway for Hanimadhoo international airport.
- However, the issue of returning Indian military personnel to the Maldives was not discussed. Misri noted that this situation had been “resolved satisfactorily” after India’s military withdrawal in May 2023, with technical staff now managing aircraft maintenance.
- “India has always been a First Responder for the Maldives,” Modi stated, underscoring India’s support during crises and the pandemic. Further, Foreign secretary highlighted India’s historic role in the Maldives, referencing its assistance during a coup attempt in 1988 and the 2004 tsunami.
- The currency swap arrangement was described as a “signal of comfort and confidence” for the Maldives, whose foreign exchange reserves have plummeted to a record low of $440 million.
- Muizzu’s visit marks his first bilateral trip to India, following a visit to Beijing that resulted in various agreements, including economic pacts and a defense agreement.
| · Tourism is vital to the Maldivian economy, accounting for nearly 30% of GDP and generating over 60% of foreign currency earnings. · However, a decline in Indian tourist arrivals over the past year, largely due to the Lakshadweep-Maldives controversy, has severely impacted revenues, estimated at around $60 million. Indian tourists are crucial not just during peak season but also in the off-season. · In 2023, India was the largest source of tourists to the Maldives, accounting for over 11% of the 1.8 million arrivals. However, by July 2024, India’s ranking fell to sixth place, with 71,381 travellers—a 42.5% decrease from the previous year. · Recent data showed only 28,604 Indian tourists visited from April to June this year, down from 54,207 the previous year, while China became the top source market with 120,000 tourists in the first half of 2024.
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