Almost a month after India announced financial aid to Maldives to help the island nation recover from the economic crisis, New Delhi is reportedly reconsidering the assistance to the island nation. The move came after President Mohamed Muizzu’s government went ahead of the free trade agreement with China, said a report.
According to a report by the Economic Times, the Mladives-China FTA will not only lead to revenue losses to the island nation but also result in trade imbalance in the region. Maldives is likely to lose around $30-40 million per annum in customs fees due to the FTA. Not only this, Maldives has also agreed to a trade agreement with Turkey, resulting in similar custom revenue losses.
While India has extended immediate relief to the Maldives, concerns remain regarding long-term debt sustainability due to a lack of transparency about the country’s debt levels and the absence of substantial economic reforms under President Mohamed Muizzu, according to an ET report.
India provided budgetary support to the Maldives by extending the rollover of a $50 million Treasury Bill for another year at the request of the Maldivian government, the Indian High Commission in the Maldives announced in September last year. This marked the second such rollover by India in 2023, following a similar extension in May 2024.
In October 2024, India agreed to provide substantial financial support to the Maldives to bolster its ailing economy. The package includes a $400 million currency swap deal, along with an additional 30 billion rupees ($357 million; £273 million) in another swap arrangement, enabling businesses to conduct transactions in local currencies instead of US dollars.
While India has been generous in its aid to Maldives, the Muizzu government has failed to take steps to revive its economy, feel experts. During President Muizzu’s visit to India last October, both countries agreed to begin discussions on a Free Trade Agreement (FTA) focused on the trade of goods and services.
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