The Maldives' request for an extension of an Indian currency swap facility has run into problems due to stringent rules and regulations governing the scheme.
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.
However, 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.
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, and debt repayments of almost $1 billion in April, including $500 million for Sukuk Bonds and $400 million for the currency swap with India, add to the fragility of the financial situation.
