India to announce financial assistance package for Maldives' economic recovery

NEW DELHI: India is to announce a "substantial financial assistance package" for Maldives to help it tide over economic woes caused mainly by the loss of tourist revenues due to the spread of the covid-19 pandemic.

A statement from the Indian High Commission in Male on the occasion of the Maldivian Independence Day described India-Maldives ties as “an all weather friendship steeped in history and with a glorious future."

"India first policy of Maldives and Neighbourhood first policy of India has set the foundation of the growing relationship," the statement said.

India has already extended assistance of $400 million through extended currency swap arrangement to help the nation tide over liquidity problems, it said. New Delhi had also provided 6.2 tons of medicines under “Operation Sanjeevani” and 600 tons of food items to the country in the midst of the pandemic.

“India will soon announce another substantial financial assistance package to support the Maldivian economy and assist in the economic recovery post covid,” the Indian statement said.

According to the World Bank, the slump in tourism had hurt the Maldivian economy badly given that the sector accounts for about two-thirds of the atoll nation’s GDP. “The shock to tourism adversely affects employment and household earnings, as one-third of adult males and a quarter of females are engaged in tourism-related jobs,” the World Bank said in a country report on its website. A related slump in the construction industry besides the suppressed demand for raw fish exports in the covid pandemic phase, have also affected the economy.

In December 2018, India had announced a $1.4-billion financial assistance package for the Maldives, a move seen as aimed at drawing the atoll nation closer into New Delhi’s sphere of influence after a period of estrangement that saw the former leadership of the Maldives leaning closer to China. It was announced during the visit of Maldivian President Ibrahim Mohamed Solih to New Delhi. Solih, backed by the combined Maldivian opposition, had in the September 2018 polls defeated the incumbent China-leaning President, Abdulla Yameen. News reports had then said that the Maldives had been weighed down by $3 billion in debt to China and was looking to India and Saudi Arabia, besides others, for help. Maldives owed the money to China for infrastructure projects undertaken by Chinese companies during Yameen’s tenure in office.

The Indian statement disclosing a financial assistance package for the Maldives came a day after it was announced that India’s central Reserve Bank had concluded the necessary formalities to extend a $400 million currency swap facility to Sri Lanka under a regional framework with another $1.1 billion currency swap facility on a bilateral basis between the two countries under consideration.

The $400 million currency swap arrangement between India’s RBI and the Central Bank of Sri Lanka will remain available till November 2022, a statement from the Indian High Commission in Colombo said. This was negotiated under the South Asian Association for Regional Cooperation (SAARC) framework.

Like in the Maldives, tourism is a key revenue earner for Sri Lanka and the sector has been badly affected by the covid-19 pandemic.