Latest news with #ForeignCurrencyAct
Arabian Post
16 hours ago
- Business
- Arabian Post
Maldives FX Reserves Bolstered by ₹33,000 Crore Swap from RBI
Malé's foreign exchange reserves have surged by more than $400 million, marking a notable strengthening of the nation's external liquidity following a currency swap arrangement with the Reserve Bank of India. The Maldives Monetary Authority drew down the entire $400 million facility in October 2024, with the impact reflecting sharply in the country's gross reserves, which rose to approximately $856 million by April 2025 from a low of $371 million earlier in the year. Fitch Ratings has affirmed the Maldives' Long‑Term Foreign‑Currency Issuer Default Rating at 'CC', citing the infusion from the RBI swap as a key factor in easing the country's liquidity pressures. The agency also credited sustained tourism receipts and the implementation of the Foreign Currency Act, which compels tourism‑related businesses to convert a mandated portion of their monthly foreign‑currency revenues, for boosting reserves. Despite the uplift in reserves, Fitch emphasised that gross holdings now cover just 1.5 months of external payments—well below the three‑and‑a‑half‑month median for comparable peers. Net reserves, after subtracting short‑term liabilities, remain critically thin at around $28 million. In its rating statement dated 12 June 2025, Fitch maintained the view that a sovereign default 'remains a likely scenario within the foreseeable future' absent significant further support or reform. ADVERTISEMENT The agency highlighted looming debt repayments of $688 million in the second half of 2025, rising to $1.1 billion in 2026, including bonds and sukuk. Policymakers in Malé are negotiating with external partners—including India, China, multilateral lenders and possibly the IMF—to secure deferments, fresh currency‑swap lines, or restructuring deals. Notwithstanding the swap, Fitch reiterated its concerns over persistent fiscal imbalance: the fiscal deficit is projected to widen to 14.5 per cent of GDP in 2025, public debt is set to reach 125 per cent of GDP by 2026, and important reforms—particularly in subsidy and healthcare spending—have been delayed on political grounds. India formally welcomed the strengthening of Maldivian reserves, with the Indian High Commission in Malé posting on X that it 'noted with satisfaction' the impact of the $400 million swap in easing external liquidity pressures. The move is part of broader bilateral economic cooperation anchored within the SAARC framework, signalling a continued role for India in supporting economic stability in Maldives. Tourism continues to underpin the archipelago's economy, with record visitor numbers bolstering inflows. Policymakers hope that the expansion of resort capacity and full operation of the new terminal at Velana International Airport will sustain growth and further cushion foreign currency earnings. Fitch projects GDP growth of around 4.8 per cent in 2025, increasing to 6.0 per cent in 2026 as tourism infrastructure develops. The Foreign Currency Act, introduced last year as a fiscal measure, requires tourism businesses to sell at least 20 per cent of their monthly foreign exchange earnings to licensed banks. Separately, the MMA raised mandatory bank conversion thresholds from 60 per cent to 90 per cent, measures aimed at shoring up foreign‑exchange liquidity. While the currency swap has delivered a temporary liquidity bridge, analysts caution that it falls short of addressing structural weaknesses. The MMA and government officials have underscored intentions to pursue fiscal consolidation and attract medium‑term financing. But Fitch has warned that absent sustained reserve accumulation, clear evidence of reform, and stronger fiscal discipline, the Maldives remains vulnerable to credit deterioration or a potential sovereign default. India's willingness to extend financial assistance underscores geopolitical and strategic interests. The inclusion of swap facilities, alongside ongoing debt negotiations with China and potential IMF engagement, may provide short‑term relief, but Maldives must improve its debt servicing capacity and rebuild buffers to avert future policy shocks.
Time of India
a day ago
- Business
- Time of India
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 improvement in the Maldives' foreign exchange (FX) reserves, noting with satisfaction that the $400 million currency swap between the Reserve Bank of India (RBI) and the Maldives Monetary Authority (MMA) played a significant role in easing the island nation's external liquidity pressures. The Indian High Commission in Male said it 'noted with satisfaction' that the rise in the Maldives' FX reserves — highlighted in a recent sovereign credit rating report — was primarily driven by the $400 million drawdown under the RBI-MMA currency swap arrangement activated in October 2024. 'The currency swap alleviated imminent external liquidity strains,' the Indian High Commission posted on X, citing the latest Fitch credit rating update on the Maldives. Global rating agency Fitch Ratings, which affirmed the Maldives' long-term foreign-currency issuer default rating at 'CC' on Thursday, acknowledged the critical support extended by India in shoring up the country's reserves, PTI reported. The rating agency attributed the reserve buildup to a combination of factors, including strong tourism receipts, the implementation of a new Foreign Currency Act mandating 20% exchange of tourism-linked forex earnings, and financial assistance from India. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Giao dịch vàng CFDs với sàn môi giới tin cậy IC Markets Tìm hiểu thêm Undo According to the Sun Online news portal, Fitch noted that while the gross FX reserves had improved — aided notably by the RBI's currency swap — the Maldives continues to face structural fiscal and external challenges. Fitch projected the country's fiscal deficit to widen to 14.5% of GDP in 2025, up from 14% in 2024, driven by high recurrent spending, particularly rising public sector wages and delays in implementing reforms related to subsidies and healthcare expenditure. The agency also warned that these vulnerabilities could complicate refinancing of Maldives' large external debt obligations in the near future. India's currency swap support to the Maldives is part of a broader effort to assist its maritime neighbour in navigating macroeconomic headwinds. The swap arrangement — extended under the SAARC framework — has previously been deployed to stabilize short-term dollar liquidity in the region. Saturday's acknowledgment by Indian authorities comes amid evolving India-Maldives ties, where economic cooperation continues to be a cornerstone despite political frictions. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
Time of India
a day ago
- Business
- Time of India
India 'satisfied' with $400 million currency swap that boosted Maldives' FX reserves
India expressed satisfaction over the USD 400 million currency swap with Maldives, which boosted the island nation's foreign exchange reserves. Fitch affirmed Maldives' sovereign rating, acknowledging the increased Forex reserves driven by the currency swap between the Reserve Bank of India and the Maldives Monetary Authority. However, persistent fiscal vulnerabilities complicate debt refinancing. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads India on Saturday noted with satisfaction that the USD 400 million currency swap between Male and New Delhi helped boost Maldives ' foreign exchange (FX) comments by the Indian High Commission in Maldives came after global credit rating agency Fitch on Thursday affirmed the archaepelagic country's sovereign rating at 'CC', among other reasons due to increased Forex Indian High Commission in Maldives, in a post on X, said it noted with satisfaction that the FX reserves increase in the island nation was driven by the USD 400 million drawdown under a currency swap between the Reserve Bank of India (RBI) and the Maldives Monetary Authority (MMA) in October 2024."The currency swap alleviated imminent external liquidity strains as noted by Fitch credit rating for Maldives, it rating agency Fitch noted that the country's FX reserves have increased due to solid tourism-related receipts, the newly-implemented Foreign Currency Act, which mandates tourism-related businesses to exchange either 20 per cent of monthly foreign-currency receipts, and the support from the RBI, alleviating imminent external liquidity strains, Sun Online news portal rating agency said that while the tourism sector continues to expand and gross FX reserves have increased following support from the RBI, persistent external and fiscal vulnerabilities will complicate refinancing of Maldives' impending large external debt-servicing obligations in the year agency projects the Maldives' fiscal deficit will widen to 14.5 per cent of GDP in 2025, up from 14 per cent in 2024 on high recurrent spending, mainly due to expectations of rising public wages and continued delays in the planned fiscal reforms of subsidies and healthcare spending largely due to political considerations the report said.
