India-Maldives currency swap: RBI’s $400 million support lifts FX reserves; Fitch cites easing of liquidity strain in rating note

India on Saturday welcomed the advance in the Maldives’ overseas change (FX) reserves, noting with satisfaction that the $400 million currency swap between the Reserve Bank of India (RBI) and the Maldives Monetary Authority (MMA) performed a big position in easing the island nation’s exterior liquidity pressures.The Indian High Commission in Male stated it “noted with satisfaction” that the rise in the Maldives’ FX reserves — highlighted in a latest sovereign credit score rating report — was primarily pushed by the $400 million drawdown below the RBI-MMA currency swap association activated in October 2024.“The currency swap alleviated imminent external liquidity strains,” the Indian High Commission posted on X, citing the most recent Fitch credit score rating replace on the Maldives.Global rating company Fitch Ratings, which affirmed the Maldives’ long-term foreign-currency issuer default rating at ‘CC’ on Thursday, acknowledged the important support prolonged by India in shoring up the nation’s reserves, PTI reported. The rating company attributed the reserve buildup to a mixture of components, together with sturdy tourism receipts, the implementation of a brand new Foreign Currency Act mandating 20% change of tourism-linked foreign exchange earnings, and monetary help from India.According to the Sun Online information portal, Fitch famous that whereas the gross FX reserves had improved — aided notably by the RBI’s currency swap — the Maldives continues to face structural fiscal and exterior challenges.Fitch projected the nation’s fiscal deficit to widen to 14.5% of GDP in 2025, up from 14% in 2024, pushed by excessive recurrent spending, significantly rising public sector wages and delays in implementing reforms associated to subsidies and healthcare expenditure. The company additionally warned that these vulnerabilities might complicate refinancing of Maldives’ giant exterior debt obligations in the close to future.India’s currency swap support to the Maldives is a component of a broader effort to help its maritime neighbour in navigating macroeconomic headwinds. The swap association — prolonged below the SAARC framework — has beforehand been deployed to stabilize short-term greenback liquidity in the area.Saturday’s acknowledgment by Indian authorities comes amid evolving India-Maldives ties, the place financial cooperation continues to be a cornerstone regardless of political frictions.