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Delhi’s financial aid to Male exceeds $2 billion as Maldives returns to ‘India First’

Growing India-Maldives cooperation is seen as a message to China, which brought Male into its circle of influence under former President Abdulla Yameen. 

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New Delhi: India’s financial assistance to the Maldives, including loans and grants for projects, has exceeded $2 billion, with the Modi government Thursday announcing a $500 million package that includes a grant of $100 million and a $400 million line of credit.

Growing cooperation between India and the Maldives over the past two years is seen as a message to China, which brought Male into its circle of influence under President Ibrahim Mohamed Solih’s predecessor Abdulla Yameen. 

The ties between New Delhi and Male have achieved new strengths since Solih came to office in November 2018, with the former’s ‘Neighbourhood First’ policy finding resonance in Maldives’ return to its traditional ‘India First’ stance under the new president. 

According to sources, there has been a “reset in the relations with the Maldives since President Solih assumed office in November 2018”. In line with its ‘Neighbourhood First’ policy, they said, India has “worked proactively” to deepen its ties with the Maldives. 

India’s assistance to its island neighbour is aimed at boosting connectivity and infrastructure projects, including a proposed cargo ferry service to boost bilateral trade. Also on the agenda is an air bubble between India and the Maldives — expected to open up this month — to help the latter recover from the hit of the pandemic.

Also Read: India-first policy stays but will be friends with China too: Maldives ex-President Nasheed

India’s support to neighbour

The $500 million package was announced during a video conference between External Affairs Minister S. Jaishankar and his Maldivian counterpart Abdulla Shahid. 

It is aimed at supporting the implementation of the ‘Greater Malé Connectivity Project (GMCP)’ in the Maldives, the Ministry of External Affairs (MEA) said in a statement.

“This (GMCP) will be the largest civilian infrastructure project in Maldives, connecting Male with three neighbouring islands — Villingili, Gulhifahu (where a port is being built under Indian LoC) and Thilafushi (new industrial zone) — by construction of a bridge-and-causeway link spanning 6.7 km,” it added.

India is also assisting Maldives in starting the aforementioned direct cargo ferry service, which was announced by Prime Minister Narendra Modi during his visit to the archipelago in June last year.

A direct cargo ferry service presents an opportunity for India to become the Maldives’ top  trade partner, sources said. In this context, and with many bilateral projects slated to commence in the next few months, it is the right time to start a cargo ferry service with the Maldives, the sources added.

To assist the Maldives in its recovery from the Covid pandemic — which has taken a huge toll on tourism, the mainstay of local economy — India has decided to create an air travel bubble “to facilitate movement of people from both sides for employment, tourism, medical emergencies etc”.

Air bubbles are a concept being explored to slowly restart international travel, which was brought to a near-complete halt by the pandemic. They seek to facilitate restricted travel between two countries with no layovers.

“In keeping with our special ties, Maldives is the first neighbouring country with which an air bubble is being operationalised. The air bubble symbolises India’s support to shore up tourism arrivals and revenues in the Maldives. Health protocols in both countries will be strictly followed,” the MEA said. The first flight under the air bubble is expected to commence on 18 August. 

India has also “decided to extend in-principle urgent financial assistance to the Government of Maldives, by way of a soft loan arrangement” in face of the financial challenges created by the pandemic. The exact modalities of this are yet to be finalised, the MEA said.

Earlier this year, to bolster the Maldives’ dwindling Forex reserves, India provided $150 million to Male under the bilateral currency swap agreement of $400 million.

The Maldives, sources said, can draw the remaining $250 million anytime until July 2021 to increase forex liquidity and for exchange rate management. On the request of Maldives, the currency swap agreement has been further extended for a period of one year. 

A shot in the arm

Ties between New Delhi and Male had plummeted significantly during the tenure of Yameen, under whom Maldives gathered Chinese debt to the tune of $2 billion.  

President Solih’s reaffirmation to the ‘India First’ policy is a shot in the arm for India. New Delhi has been quite apprehensive of Beijing’s growing influence in the Maldives even as it continues to give utmost priority to the island nation.

After coming to power for his second term in May last year, Prime Minister Modi’s first international destination was the Maldives. He was also the only head of state to attend President Solih’s swearing-in ceremony in November 2018.

Also Read: Relationship with India ‘outstanding’, China is ‘generous’: Maldives FM Abdulla Shahid


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