India gives Maldives $50mn in budgetary support amid IMF warning

May 14, 2024 | 17:08:09

The recent budgetary support from New Delhi to Male comes as relations between the two countries have deteriorated after pro-China President Mohamed Muizzu took office.

NEW DELHI: The Maldivian government said India has extended “budgetary support” to the island nation with a rollover of a $50 million Treasury Bill. This comes as the International Monetary Fund (IMF) warned Male against the looming “debt distress” as it looks to borrow more from China. 

Maldivian Foreign Minister Moosa Zameer took to X and thanked his Indian counterpart External Affairs Minister (EAM) Dr S Jaishankar and the Government of India for “extending vital budgetary support to Maldives with the rollover of USD 50 million Treasury Bill.” 

He added, “This is a true gesture of goodwill which signifies the longstanding friendship between #Maldives and #India.” 

In a statement, the foreign ministry said that the Indian government’s decision to roll over the Treasury Bill came after a request by Zameer during his official bilateral visit to India, earlier this year. 

“The Government of Maldives is highly appreciative of the generous support that the Government of India has been providing to the Maldives in the form of budgetary support,” said the Maldivian foreign ministry. 

A large number of infrastructural developmental and high-impact community developmental projects are underway with assistance from the Indian government, “which consists of a notable part as grant assistance,” it added.

The recent budgetary support from New Delhi to Male comes amid relations between the two countries deteriorating after pro-China President Mohamed Muizzu took office and demanded that all Indian military personnel operating the island nation’s three aviation platforms leave. 

Earlier this month, India withdrew its 76 troops from Maldives and replaced them with civilian employees of Hindustan Aeronautics Limited (HAL). 

The IMF, on Monday, warned the Maldives that it remained at a “high risk of external and overall debt distress” without “significant policy changes”. 

“Uncertainty surrounding the outlook is high and risks are tilted to the downside, including from delayed fiscal consolidation and weaker growth in key sources markets for tourism,” said the United States-based organisation in a statement. 

The IMF has also urged Maldives to urgently raise revenue, cut spending and reduce external borrowing to avoid a major economic crisis.

Notably, tourism is the largest contributor to the Maldivian economy and accounts for at least 28 percent of its GDP. 

Earlier this month, Maldives urged Indians to visit the island nation in large numbers after a significant fall in the number of tourists from India in the first four months of 2024, amid Muizzu’s ‘India Out’ rhetoric and after some top Maldivian officials made disrespectful remarks against Indian Prime Minister Narendra Modi. 

Meanwhile, China has stepped in and pledged more funding for the Maldives after Muizzu’s victory, who has promised to build thousands of houses, reclaim more land for urban development and upgrade airports, all with Chinese funding. 

A report by AFP citing official data said the island nation’s foreign debt reached $4.038 billion last year, which is about 118 percent of its GDP. 

China is also Maldives’ biggest lender, with the Export-Import Bank of China owning 25.2 percent of the island nation’s debt, as of June 2023.