The Maldives said Wednesday that India and China have agreed to cooperate in facilitating payments for imports in their respective currencies instead of the US dollar. The move is expected to help the Maldives save almost 50 per cent of its annual $1.5 billion import bill from the two countries.
International trade in local currencies is beneficial as it helps countries conserve their foreign exchange reserves. This move also represents a significant shift away from the dominant use of the US dollar in international transactions.
Maldives’ Economic Development Minister Mohamed Saeed said he met with the Indian High Commissioner Munu Mahawar two weeks ago. Mahawar confirmed that New Delhi would support and cooperate in arranging the settlement of import payments in Indian Rupee.
Similarly, Saeed received a letter from China’s Commerce Ministry two days ago, in which Beijing assured cooperation to allow import payments in Yuan, as requested by President Mohamed Muizzu.
The Maldives imports goods worth $780 million from India and $720 million from China annually. In April, Minister Saeed had first announced that the Maldives was discussing with both India and China the possibility of making import payments in Maldivian Rufiyaa.
In July 2023, the Government of India declared that Maldives was among the 22 countries that were permitted by the Reserve Bank of India to open Special Rupee Vostro Accounts (SRVAs) as part of efforts to promote bilateral trade in local currencies.
News portal Sun.mv on Wednesday quoted Saeed as speaking with state-run PSM Media: “Maldives imports between $600-700 million in commodities from both India and China, each year. Therefore, we import around $1.4 billion to $1.5 billion in commodities annually, from both markets combined.”
“We are negotiating with both sides to make arrangements for us so that, for example, for imports from China, the shipping company can bring the invoice and the payment can be settled by converting Maldivian Rufiyaa to their local currency through the banks, instead of US dollar,” Saeed said, adding, it will save up to 50 per cent from the annual $1.5 million in imports from the two countries.
“If we can arrange up to $300 million from each country, that means $700 million. This means we can eliminate the reliance on US dollars by that amount in the future. That will reduce the demand for dollars. And the future demand for dollars will continue to fall,” Saeed said.
Saeed blamed the poor state of finances on the former administration and agreed that challenges persist as foreign countries are still skeptical about the Maldives but “it is slowly improving.” The new Maldivian administration has said that the country’s economic situation was “alarming”, but that the government was implementing strong fiscal reforms to rectify the issue, including stopping printing money.
With inputs from agencies.
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