New Delhi: India Monday agreed to roll over a $50 million loan to the Maldives after the Mohamed Muizzu government made a special request to “secure budgetary support” from New Delhi, said the Indian High Commission in Malé.
The roll-over temporarily eases the debt repayment schedule of the island nation, which is set to spike to over $1.07 billion in 2026.
“State Bank of India has subscribed for one more year the USD 50 million Government Treasury Bill, issued by Ministry of Finance of Maldives…The continuation of subscription has been made at the special request of the Government of Maldives to secure budgetary support from the Government of India,” the Indian High Commission said on X.
The roll-over of the $50 million loan comes after Maldivian foreign minister Moosa Zameer met with his Indian counterpart S. Jaishankar last Thursday. Debt relief was discussed between the two.
Malé owed New Delhi approximately $400.9 million at the end of last year, with $50 million being due this month.
Zameer’s visit last week was the first high-level visit by a Maldivian government official to India after Muizzu was elected as president in September last year on an “India-Out” campaign.
Muizzu’s election has seen ties between the two countries hit a rough patch.
One of Muizzu’s major demands was the removal of 70-odd unarmed Indian military personnel operating three aviation platforms from the country.
Seen as a pro-China leader, Muizzu has in the past fiew months changed tactics as a result of Maldives’ growing debt crisis. In an interview to a local media outlet in March, he called India Maldives’ “closest ally”.
The Indian Ministry of External Affairs last week confirmed that the last batch of Indian military personnel had departed the Maldives and were replaced with technical personnel to continue operating the aviation platforms for medical evacuations and humanitarian assistance.
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Maldivian debt crisis
The total publicly guaranteed debt of Maldives rose to $8 billion in 2023, which is about 122.9 percent of its total gross domestic product (GDP), the World Bank reported on 8 May.
The debt grew by nearly $1 billion between 2022 and 2023 as a result of the government’s efforts to finance infrastructure projects and its fiscal deficit.
In its report, the World Bank said the Maldives’ outstanding external debt alone stood at roughly $3.3 billion in 2023, or 50.5 percent of GDP.
In the past few years, both China and India have lent heavily to Maldives, as the island country has increasingly invested in large infrastructure projects. China has lent over $1 billion to Malé.
“India has been a key provider of development assistance to the Maldives… They (projects) range from infrastructure projects and social initiatives to medical evacuation and health facilities. We have also extended financial support on favourable terms in the past,” Jaishankar said in his opening remarks to Zameer last week.
For Maldives, the loans have come at a cost for an economy that relies almost entirely on revenues from high-end tourism. Earlier this year, after a row sparked by comments against Prime Minister Narendra Modi by deputy ministers in the Maldivian government, tourists from India reduced their enquiries about travelling to the archipelago.
The total foreign exchange reserves held by the government of Maldives declined by 34.9 percent in February 2024 in comparison to end-2022, according to the World Bank.
Despite the growth of tourist arrivals to the country — a 12.1 per cent surge in 2023 in comparison to 2022, according to the Maldivian tourism ministry — travel sector receipts decreased by 9.2 percent of GDP in 2023, reported the World Bank.
It is projected that the Maldivian government will have to pay $512 million in 2024, and again in 2025, to service its external debt. This will jump to $1.07 billion in 2026, according to the World Bank.
(Edited by Nida Fatima Siddiqui)
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