To keep China at bay, India announces 500 mn dollar financial package for Maldives

New Delhi: In a major move towards cementing close bilateral Indo-Maldivian strategic ties and keeping Chinese influence in the maritime neighbourhood at bay, India on Thursday announced a “financial package consisting of a grant of US$ 100 million and a new Line of Credit (LoC) of US$ 400 million” for the ambitious ​Greater Malé Connectivity Project (GMCP) in India’s south-western maritime neighbour Maldives.

The announcement was made by External Affairs Minister (EAM) S. Jaishankar after a meeting through video-conference on Thursday with Maldivian Foreign Minister Abdulla Shahid. India also decided to continue quotas for supply to Maldives of food items like potatoes, onions, rice, wheat, flour, sugar, dal (pulses) and eggs that will ensure food security to the tiny archipelago nation, besides announcing “creation of an air travel bubble between India and Maldives” from August 18 and a direct cargo ferry service between India and Maldives that will commence soon. India will also extend in-principle urgent financial assistance to Maldives by way of a soft loan arrangement amid the Covid pandemic.

The complex GMCP project will be the largest civilian infrastructure project in Maldives, connecting the Maldivian Capital Malé  with three neighbouring islands - Villingili, Gulhifahu (where a port is being built under Indian LoC) and Thilafushi (new industrial zone) – by construction of a bridge-and-causeway link spanning 6.7 km. It is reliably learnt that the 6.7 km GMCP will dwarf in magnitude the 1.39 km Maldives-China Friendship bridge (connecting Malé with Hulhule and Hulhumale to its east) built earlier and render that insignificant in comparison. It is also reliably learnt that India’s total financial commitment in the Maldives covering all loan and grant projects is now well over a whopping US$ 2 billion since November, 2018, when the Maldivian Government under President Ibrahim Mohamed Solih  assumed office.

Once completed, the GMCP will “streamline connectivity between the four islands, thereby boosting economic activity, generating employment and promoting holistic urban development in the Malé region”. South Asian foreign policy watchers and observers point out that the GMCP will help in demonstrating India’s overarching presence in Maldives through a high-visibility project in the Greater Malé region and showcase India’s expertise in conceptualising and implementing a complex infrastructural project of this scale.

It is reliably learnt that urgent financial assistance for the Maldives was requested personally by Maldivian President Mr. Solih during an earlier teleconference with Prime Minister Narendra Modi. The Maldives is understood to be facing a financial gap of US$ 395 million for the rest of the year amid falling revenues due to the the Covid pandemic on account of adverse impact on main revenue earners like tourism and fisheries exports. It is learnt that the Maldives will be the first country to receive financial assistance from India to deal with the pandemic.

It is also understood that India has so far provided US$ 150 million to Maldives under the bilateral currency swap agreement of US$ 400 million. The Maldivian Government can draw the remaining US$250 million anytime till July 2021 to increase forex liquidity and exchange rate management. Also, the currency swap agreement between the two nations has been further extended for a period of one year.

India has also renewed quotas for supply of essential commodities to the Maldives for the year 2020-21 that includes food items like potatoes, onions, rice, wheat, flour, sugar, dal (pulses) and eggs on the one hand as well as river sand and stone aggregates. The quotas are expected to assure food security, and the supply of essential construction items, thereby providing certainty and price stability for such essential items in the Maldives, New Delhi meanwhile said.

On Thursday, India also announced that a direct cargo ferry service between India and Maldives would “commence shortly” towards “enhancing bilateral trade and connectivity and in further boosting the economic partnership between the two countries”. The cargo ferry service “will enhance sea connectivity and provide predictability in supplies for importers in Maldives and exporters in India” besides also “reducing logistics costs and time for traders”.

EAM Jaishankar further announced “creation of an air travel bubble between India and Maldives” from August 18 “to facilitate movement of people from both sides for employment, tourism, medical emergencies etc”. New Delhi said that “in keeping with our special ties, Maldives is the first neighbouring country with which an air bubble is being operationalised and that this would “shore up tourism arrivals and revenues in the Maldives”.

It is reliably learnt that seven big projects are being implemented under the US$ 800 million Line of Credit extended by India to Maldives. The projects are the water supply and sewerage systems on 34 Islands; Addu Development Project-Road Development and Reclamation, the Expansion of Maldives Industrial Fisheries Companies (MIFCO) Facilities, the Gulhifalhu Port Project, the Hanimadhoo International Airport Redevelopment, the Construction of International cricket stadium in Hulhumale, and a Cancer-treatment hospital in Hulhumale.

Experts estimate that with a geographical span from the northernmost to the southernmost islands of Maldives and by covering infrastructure, socio-economic and sports projects, these projects are expected to be transformational for the country and take India-Maldives relations to new heights.