MMA and RBI Sign MoU to Boost Local Currency Trade

The Maldives Monetary Authority (MMA) and the Reserve Bank of India (RBI) signed a Memorandum of Understanding (MoU) today in Mumbai to promote the use of local currencies – the Maldivian Rufiyaa (MVR) and the Indian Rupee (INR) – for cross-border transactions.

Signed by MMA Governor Ahmed Munawar and RBI Governor Shaktikanta Das, the agreement sets the stage for businesses in both countries to conduct transactions directly in their respective domestic currencies. This initiative applies to current account transactions, permissible capital account activities, and other mutually agreed economic operations.

The framework also aims to facilitate trading in the MVR-INR currency pair within the foreign exchange market, reducing reliance on third-party currencies. By enabling direct invoicing and settlement, the initiative is expected to lower transaction costs and improve settlement times for businesses engaged in bilateral trade.

This milestone is seen as a major step in strengthening economic cooperation between the Maldives and India. The use of local currencies is expected to enhance trade ties, deepen financial integration, and promote greater ease of doing business between the two nations.

The Maldives and India recently advanced their bilateral economic partnership with a currency swap arrangement that allows the settlement of trade transactions in local currencies. This initiative is part of a broader effort under the SAARC Framework on Currency Swap Arrangements (2024-2027) and addresses critical economic concerns for the Maldives.

This agreement includes provisions for a $400 million swap and INR 30 billion, enabling the Maldives Monetary Authority to access foreign exchange liquidity without depleting reserves. It facilitates trade efficiency by allowing settlements in Indian Rupees, thereby reducing dependence on foreign currencies like the USD. This measure is particularly beneficial as India is a major trading partner of the Maldives, and the arrangement could alleviate foreign exchange pressures while strengthening bilateral trade.

The deal also symbolizes a strategic shift toward deeper economic collaboration, emphasizing India’s growing role in stabilizing the Maldivian economy amid challenges such as declining reserves and rising debt obligations. However, this partnership further entwines the Maldives' financial stability with India’s economic policies, highlighting the importance of a balanced foreign relations strategy