Bureau (29 January 2025): India is contemplating halting its financial aid to the Maldives after the island nation implemented free trade agreements (FTAs) with China and Turkey. This move comes as a significant shift in the diplomatic and economic relations between the two countries.
India's previous financial support has been instrumental in stabilizing the Maldivian economy, especially during times of economic crisis. The aid included substantial financial packages aimed at bolstering the Maldives' fiscal health and preventing a sovereign default.
However, the recent FTAs signed by the Maldives with China and Turkey have raised concerns in New Delhi. These agreements are expected to lead to significant revenue losses for the Maldives, estimated at around $30-40 million per annum in customs fees. Additionally, the FTAs could create a trade imbalance, further complicating the economic landscape of the island nation.
The Indian government is now reconsidering its financial aid to the Maldives, weighing the potential implications of these new trade agreements. Officials have expressed concerns over the long-term debt sustainability of the Maldives, given the lack of transparency about the country's debt levels and the absence of substantial economic reforms under President Mohamed Muizzu.
As India reassesses its support, the diplomatic ties between the two nations hang in the balance. The outcome of this reconsideration could have far-reaching consequences for the Maldives' economic stability and its relations with India.
