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New Delhi: India is rethinking on the utility of continuing with its financial assistance to the Maldives after the island nation decided to bring into effect a free trade agreement with China from this month.
According to some estimates, FTA will dent Maldives revenue as customs forego will be $30-40 million per annum. It will also skew trade balance against Maldives given the size and profile of the two economies.
Maldives preferential trade agreement with Turkey, signed in November, will also result in a revenue loss for Male. The Maldives-Turkey PTA will become effective on a mutually agreed date in the first quarter of this year.
While India has provided immediate relief to the Maldives, there are concerns over long-term debt sustainability in the absence of clarity on the country’s debt exposure and concrete economic reforms by President Mohamed Muizzu, people familiar with the Maldivian economy told ET.
It is widely acknowledged by international financial institutions that India’s support has shored up the Maldivian economy, which has been hit by Covid and subsequent revenue loss from tourism. In fact, sources said India has been generous in its financial assistance and this has significantly enhanced the fiscal position of the Maldives and contributed to its economic stability.
The Indian government has facilitated roll-over of two treasury bills amounting to $50 million each along with interest of $6.4 million and conclusion of a currency swap agreement with $400 million and ₹3,000 crore facility.
When Muizzu visited India last October it was decided to initiate discussions on FTA focusing on trade in goods and services between the two countries.
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