Former President Mohamed Nasheed has said that the Free Trade Agreement (FTA) signed between the governments of China and the Maldives, affects the latter’s revenue and is not a beneficial agreement for the economy of the island nation.

Speaking to India's Wion News, Nasheed said that the implementation of the FTA is affecting the Maldivian government's revenue.

Signed in December 2017 during former President Abdulla Yameen's administration, the Maldives-China Free Trade Agreement (FTA) is the Maldives' first FTA.

The FTA came into effect from January 2025. India had expressed concerns in early 2025, warning that the FTA could affect the Maldives' economic health and influence India's policies in the region.

Expressing concerns about the Maldives-China FTA that came into effect earlier this year, the government of India stated that it would consider such agreements when formulating its own foreign aid policies. India's External Affairs Ministry spokesperson Randhir Jaiswal described the loss of revenue from eliminating Chinese import duties as a potential challenge to the Maldives' financial health.

The FTA, signed in 2014, came into effect on 1 January 2025. Although the People’s Majlis approved the agreement in 2017, it was suspended in 2018 by the administration of former president Ibrahim Mohamed Solih. The agreement was reached during Yameen's administration.

However, current President Dr. Mohamed Muizzu, who took office in 2023, has allowed the implementation of the FTA this year. Maldives has faced liquidity challenges due to increasing debt repayment issues. Last year, the U.S. rating agency Fitch downgraded the Maldives' debt to "junk" status due to worsening liquidity conditions.

During Muizzu's visit to India in October 2024, both governments agreed to restore relations, with India promising a USD 750 million currency swap agreement for the island nation. Muizzu's visit came after a challenging year for India-Maldives relations.

At the beginning of his term, Muizzu visited Turkey and China before India, targeting New Delhi's influence. The most challenging moment was in January 2024 when three Maldivian Deputy Ministers made derogatory remarks about Indian Prime Minister Narendra Modi on social media.

Before the end of this year, India agreed to roll over at least USD 100 million in loans owed by the Maldives and assured additional financial assistance. Muizzu, who was seen as a leading figure in the "India Out" movement, worked to restore relations with India before the end of 2024, in an attempt to reinstate the soured ties.