The central bank of Maldives, Maldives Monetary Authority (MMA) and the central bank of India, Reserve Bank of India (RBI) signed an agreement to do a USD 200 million currency swap.
Funds given as currency swaps must be returned within a predetermined time frame. In this exchange, India will hold the same amount of Maldivian Rufiyaa in their reserve. The loan repayment must occur in US Dollars.
SAARC has a pre-established framework for currency swapping between two countries. Moreover, this is not the first time the Maldives had done a currency swap with India.
The currency swap was done at a time when the USD reserve was nearing depletion. The aim of the swap is to rejuvenate the national reserve and maintain the dollar rate at the current level. Furthermore, MMA added that this will increase the circulation of USD within domestic markets.
Much like other loans, currency swap also charges an interest rate and therefore, the repayment will be more than the USD 200 million issues. However, MMA did not reveal the tenure and interest rate of the project.
MMA signed an agreement to swap USD 400 million with the central bank of India, and the loan was settled last year, in December.