India and China have agreed to cooperate in providing non-USD payment options for the imports of the Maldives. This move aims to enable the Maldives to conduct transactions in the currencies of these two Asian giants, rather than solely relying on the US dollar.
The Economic Minister of Maldives, Mohamed Saeed, announced this cooperative effort, highlighting the potential for the Maldives to settle import payments using the Chinese Renminbi (RMB) and the Indian Rupee. Saeed revealed that China’s Commerce Ministry provided assurances of cooperation following a request made by President Dr. Mohamed Muizzu.
In a PSM interview on Wednesday, Saeed disclosed that India also expressed its support for facilitating import payments in Indian Rupees. He emphasized the significance of this arrangement, considering that Maldives imports commodities worth between USD 600-700 million annually from both India and China, amounting to approximately USD 1.4 to 1.5 billion.
Under this proposed system, import payments could be settled by converting Maldivian Rufiyaa directly into local currencies through banks, bypassing the need for US dollars. Saeed estimates potential savings of up to 50% from the current annual import expenditure, a substantial sum of around USD 1.5 billion.
Addressing the broader economic context, Saeed acknowledged persistent challenges stemming from past financial mismanagement, leading to foreign skepticism towards the Maldives. However, he expressed optimism about the ongoing fiscal reforms, including measures to strengthen the Maldivian Rufiyaa and stabilize the exchange rate against the US dollar.
President Muizzu has underscored the urgency of these reforms, characterizing the economic situation as “alarming” but assuring the public of the government’s commitment to implementing robust corrective measures, including prudent fiscal policies and an end to monetary expansion.
The cooperation between India and China in facilitating non-USD payment options for Maldives’ imports signals a strategic shift in the region’s economic dynamics, potentially reducing the island nation’s dependency on the US dollar and fostering closer economic ties with its Asian neighbors.
