India and China agree to cooperate in non-USD payment option for Maldives’ imports

The governments of both India and China have agreed to cooperate in efforts to allow Maldives to pay for imports in the countries’ currencies, instead of US dollars, according to Maldives’ Economic Minister Mohamed Saeed.

The remark comes after Saeed told a gathering in April that Maldives will soon have the option to settle their import payments using the Chinese currency, the Renminbi (RMB), which is mainly used for domestic transactions within mainland China.

In an interview to PSM on Wednesday, Saeed said he received a letter from China’s Commerce Ministry, two days back, in which Beijing provided assurance it will cooperate in allowing the option to settle import payments in the local Chinese currency, as requested by President Dr. Mohamed Muizzu.

Saeed added that he met with the Indian High Commissioner Munu Mahawar two weeks back, and that he said the New Delhi would support and cooperate in arranging for the settlement of import payments in Indian Rupee.

According to Saeed, Maldives imports between USD 600-700 million in commodities from both India and China, each year.

“Therefore, we import around USD 1.4 billion to USD 1.5 billion in commodities annually, from both markets combined,” he said.

“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 it will save up to 50 percent from the annual USD 1.5 million in imports from the two countries.

“If we can arrange up to USD 300 million from each country, that means USD 700 million,” he said.

“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 that challenges persist, with foreign countries still skeptical about Maldives, which he said was due to the poor state of finances the former administration left the country in.

But he said it was slowly improving.

Saeed had previously said the Maldivian Rufiyaa was expected to strengthen against US dollar by 30-40 percent within the coming months.

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.

President Muizzu has previously said that the reforms have begun to produce results, with the value of the Maldivian Rufiyaa holding strong, and the dollar exchange rate dropping.