India’s Financial Support to the Maldives
India extended financial assistance to the Maldives by rolling over a $50 million Treasury Bill. A Treasury Bill (T-bill) “rollover” means using the amount received from a maturing T-bill to purchase a new one, thereby continuing the investment for another term. This decision came at the request of the Maldivian government, amid rising economic challenges. Both India and China are the Maldives’ primary creditors, competing for influence in this strategically important Indian Ocean nation. The Maldives faces substantial debt, with public debt exceeding 134% of its GDP.
Financial Assistance Details
India’s State Bank has rolled over its subscription to a Treasury Bill for another year. This financial support is part of a government-to-government arrangement aimed at providing emergency assistance.
Economic Context
The Maldives has been struggling with low foreign exchange reserves and high external debt. As of late 2024, its total public debt reached $9.4 billion, reflecting increase over the previous year. The country is also facing credit rating downgrades from agencies like Fitch and Moody’s, which limit access to new financing.
Impact of Financial Support
The rollover of the Treasury Bill is expected to support the Maldivian government’s ongoing fiscal reforms. It is seen as a demonstration of India’s commitment to its ‘Neighbourhood First’ policy, which emphasises strengthening ties with neighbouring countries. The assistance is crucial for the Maldives as it navigates its economic challenges.
Strategic Importance of the Maldives
The Maldives holds strategic importance for both India and China. Its location in the Indian Ocean makes it a key player in regional dynamics. India’s financial support is not only a gesture of friendship but also a strategic move to maintain influence in the region amidst competition with China.
Future Outlook
The Maldives faces a spike in debt servicing in 2025 and 2026. The continuation of financial support from India will be essential for the country’s economic stability. The relationship between India and the Maldives is likely to evolve as both nations navigate their economic and geopolitical landscapes.
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