Experts estimate that this trade deal could cost the Maldives between $30 to $40 million in lost revenue each year. It may also negatively impact the country’s trade balance, given the economic differences between China and the Maldives.
Additionally, a preferential trade agreement between the Maldives and Turkey, signed in November, is set to further strain revenues. This agreement will go into effect soon.
India’s financial support has been critical for the Maldives, especially after the economic downturn caused by COVID-19 and the decline in tourism revenue. Officials note that India’s aid has strengthened the Maldivian economy during hard times, making a significant impact on its financial stability.
To support the Maldives, India has rolled over two treasury bills worth $50 million each and agreed to a currency swap worth $400 million, along with additional facilities in Indian Rupees. These actions were part of the discussions during President Mohamed Muizzu’s visit to India last October, where both countries looked into possibilities for an FTA focusing on trade in goods and services.
While India has provided immediate assistance, there are ongoing concerns regarding the Maldives’ long-term debt sustainability. Clarity on the country’s financial situation and necessary economic reforms are crucial for its future stability.
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