India has stepped in to provide crucial financial assistance to the Maldives, helping the island nation avoid the risk of default on its upcoming Islamic bond payments. India’s loan, made through the State Bank of India, is the second such support this year, aimed at helping the Maldives manage its short-term financial obligations.
The High Commission of India in the Maldives confirmed on Thursday that the country received a $50 million emergency loan, part of an ongoing effort to assist the Maldives with its economic challenges. "These subscriptions have been made at the special request of the Government of Maldives as emergency financial assistance," India stated, noting that the loan is interest-free.
This aid comes at a critical time as the Maldives faces increasing investor concerns over a potential sukuk default—the world’s first, if it occurs. The country currently holds $500 million in outstanding sukuk debt, with a crucial $24.6 million coupon payment due on October 8, followed by another payment later in the month.
India’s financial support is part of a broader strategy to assert influence in the region, particularly as relations between the two countries have been tense in recent years. Maldivian President Mohamed Muizzu came to power on a platform advocating for closer ties with China, the country’s largest bilateral lender, while taking a more distanced approach to India.
In addition to this loan, the Maldives is negotiating a $400 million currency swap agreement with India, which could provide further relief. Talks are expected to progress during President Muizzu’s upcoming visit to India.
Much of the Maldives’ debt burden is owed to China, which has extended $1.37 billion in loans, compared to India’s $124 million. While China has also committed to strengthening trade and investment ties with the Maldives, India’s support remains crucial in the short term.
The Maldives’ central bank maintains confidence in the country’s ability to meet its debt obligations, despite ongoing economic pressures exacerbated by the COVID-19 pandemic, which took a toll on its tourism-dependent economy.