China and the Maldives today signed a new agreement that will allow Beijing to provide more financial support to the already debt-ridden country, with China’s central bank saying the pact will also help boost trade and investment.
The Memorandum of Understanding or MoU between the People’s Bank of China and the Maldives Ministry of Economic Development allows Beijing and Male to promote direct investment and local currency settlement for current account transactions.
China has not said anything further about the deal. The Maldives, already facing a huge debt burden, is barely avoiding default.
In a statement following the agreement, China’s Foreign Ministry said it was actively communicating with the Maldives regarding Beijing’s growing debt and enhancing financial cooperation.
“China will, as always, provide support and assistance for the Maldives’ economic and social development to the best of its abilities,” Chinese Foreign Ministry spokesman Mao Ning said.
Maldives’ growing debt worries
The Maldives’ debt worries are serious and growing rapidly. The Maldives government vowed Thursday not to become the first country to default on Islamic sovereign debt by failing to make a $25 million payment due next month.
According to the World Bank, China is the largest lender to the Maldives and China’s debt has risen to over $1.3 billion. China is in talks to provide more “aid” to the Maldives.
The Maldives debt crisis has coincided with a change in government and its political and geopolitical stance. The new Maldives government is increasingly siding with China despite the country’s growing debt.
Maldives President Mohamed Muizzo’s party won a landslide victory in parliamentary elections held in April this year. The result marks a major shift in the island nation’s stance as it increasingly ties with China and moves away from its traditional partner India.
The Maldives has been criticised in recent weeks over suspicions that it will not be able to repay its debt.
India-Maldives relations strained
Maldives President Mohammed Muizzo will visit India on an official visit “very soon”, his spokesperson has said.
The announcement of Mr Muizzu’s visit came on a day when two junior ministers, who were suspended in January for making derogatory remarks against Prime Minister Narendra Modi, resigned from the government.
Known for his pro-China views, Mr Muizzu came to New Delhi to attend the swearing-in ceremony of Prime Minister Modi on June 9. Unlike his predecessors, who first visited New Delhi after assuming office, Mr Muizzu first went to Turkey and then went to China for his first state visit in January.
Relations between India and Maldives have been strained since Mr Muizzo became President. Within hours of taking oath, he demanded the withdrawal of Indian military personnel deployed on three aviation platforms gifted by India to the Maldives. After talks between the two sides, the Indian military personnel were replaced by civilians.
The matter worsened further after three deputy ministers of Maldives made controversial remarks about India and Prime Minister Modi on social media.
The Maldives Foreign Ministry distanced itself from his comments, saying they did not represent the views of the Maldives government.
Three junior ministers were suspended and two of them – Maryam Shiuna and Malsha Sharif – have now resigned.
