FTAs may plunge Maldives into financial crisis: India’s MEA
Maldives owes a large portion of its debt to China and India
The negotiations for the China-Maldives free trade agreement dated September 2015
The Ministry of External Affairs of India (MEA) has expressed concern that the recent Free Trade Agreements (FTAs) signed by the Maldives could have negative economic impacts on the island nation.
The neighboring country on Friday expressed its concerns about the agreements without specifically naming China or Turkey.
Experts earlier highlighted that due to the free trade agreement between China and the Maldives, which came into effect on 1 January 2025, the Maldives' debt to China, one of its main import partners, could increase. They also warned that customs duty revenue could decrease, and there could be a risk of supply chain disruptions.
In addition to this, the Maldives signed a trade agreement with Turkey last year. The incumbent administration of President Dr. Mohamed Muizzu has revealed that this agreement includes reducing or eliminating duties from both sides.
The neighboring country’s Ministry of External Affairs Spokesperson Randhir Jaiswal told reporters that the recent agreements are concerning as they are expected to reduce the Maldivian government's revenue. This is not good for the country's long-term fiscal stability.
He added that there is no room for doubt that India’s MEA will consider these factors when formulating policies.
Maldives owes a large portion of its debt to China and India. According to World Bank statistics, China has loaned USD 1.37 billion and India has loaned USD 124 million to the Maldives.
In October, India signed a USD 400 million and INR 30 billion which is approximately USD 346 million currency swap agreement with the Maldives. They also agreed to start discussions on a free trade agreement focusing on goods and services.
Rating agency Moody's in December 2024 stated that with "large external debt obligations," the reserves are at a very low level. The agency also predicted that "the Maldives will face difficulties in obtaining financing from bilateral and international sources to increase foreign currency reserves.
