Maldives Inks MoU with China for local currency business exchange

The agreement between the Maldivian government and the People’s Bank of China signifies progress for the country's economic plan and brings some relief to Maldives amidst a severe foreign exchange crisis. India is expected to reach a comparable deal with the Maldives as discussions are underway for an MoU permitting trade in local currencies and Indian rupees. 

The Maldives purchases goods totaling USD 780 million every year from India. It is likely that the agreement will be finalized during President Muizzu's upcoming visit to India. Maldives spokesperson Heena Waleed told the press on September 10 that the president will soon visit India, with ongoing talks to determine the specific date, but did not provide additional information. The potential deal would enable the Maldives to pay for Indian imports in their own currency, easing the pressure on their foreign reserves and decreasing reliance on the US dollar.

With one agreement already in place and another in progress, Maldives can conduct transactions and make direct investments in local currencies with India and China, reducing reliance on the US dollar and providing much-needed relief for the debt-ridden country.

The change is extremely important for the Maldives because the country is facing a foreign exchange crisis, mainly due to the decrease in its US dollar reserves despite the majority of its tourism business being conducted in foreign currencies.