South Asia

Maldives Wants to Use Proposed Indian Line of Credit to Develop Main International Port

India is set to offer a line of credit amounting to at least $700 million during President Ibrahim Solih’s upcoming visit.

New Delhi: When Ibrahim Solih arrives in Delhi next week for his first foreign trip as president of the Maldives, he will be greeted by a red-carpet welcome and a host bearing gifts.

India is set to offer a line of credit amounting to least $700 million – a large chunk of which the Maldivian government wants to utilise for shifting and expanding the strategically-located Indian Ocean nation’s main international port.

Solih will be in Delhi on December 17, which will be his first official foreign trip after his upset victory over the incumbent Abdulla Yameen at the time. With India having a strained relationship with Yameen, New Delhi viewed the opposition’s victory with a sigh of relief and an opportunity to mend an important relationship.

With less than a week left, negotiations are well underway about the deliverables that would be signed during the visit.

The talks began last month when the Maldivian foreign minister, Abdulla Shahid was in Delhi, along with his cabinet colleagues, finance minister, Ibrahim Ameer and economic development minister, Fayyaz Ismail.

“If we give the proposal and the project is viable, India is ready to finance whatever we submit,” Maldivian finance minister Ibrahim Ameer told The Wire.

During Solih and Modi’s first meeting after his swearing-in ceremony, the new president asked for support for “housing and infrastructure development as well as for establishing water and sewage systems in the outlying islands”.

Also read: Maldives: New President Solih Asks for Indian Support

Along with setting up of tertiary hospitals, developing the outer islands was a part of the opposition’s manifesto.

However, the new Maldives government also has an eye to kick-start a major infrastructure project which has been dormant for years.

Ameer told The Wire that the projects discussed with India for which it is seeking assistance include the relocation of Malé Commercial Harbour to nearby Kaafu Thilafushi.

“The economic development ministry is doing the costing and preparing a proposal… [cost] will be close to $200-$300 million. It will be carried out in phases,” he said.

Malé Commercial Harbour is the primary international port for the island nation, but with no renovation in decades, it has become increasingly congested. With no scope for major expansion in the densely populated Maldivian capital, plans had been drawn up to relocate the port, but no suitable developers have been found so far.

As per Indian government sources, India has also offered a soft loan of around $700 million for development assistance, which is the largest ever Indian line of credit to the Maldives. Previously, EXIM Bank had extended a line of credit of $40 million for building 500 housing units in 2010-11.

Ameer, however, noted there was “no limit” to the overall Indian assistance proposed during talks in Delhi. “There is no limit like that. It can go up to one billion dollars. We have to give viable projects and they are ready to fund it… in our discussions, Indian officials said that they can open a line of credit through Indian EXIM bank at 1.5% interest,” he said.

A budgetary support of $200 million was also settled during the discussions in New Delhi, but negotiations are still underway on the disbursal schedule.

“It is not yet finalised how that will be given or dispersed. But we will be getting some amount as budgetary support and other in form of low-interest bonds or something like that,” said Ameer.

In December 2016, the Maldives Monetary Authority had secured its first currency swap deal with the Reserve Bank of India. It was signed as the island-nation had exhausted its treasury in order to compensate the Indian infrastructure group – GMR for cancelling the contract to develop the main international airport.

The new government in Malé wants to expand this arrangement. “We have actually requested to increase the amount and the period that it is available. It is still being discussed,” said Ameer.

The Maldives is facing a serious debt management crisis, with national debt standing at $3.7 billion or 53% of the GDP. External debt is around $1.8 billion, of which $1.4 billion is owed just to China.

Also read: Backed by India, Maldives Becomes IORA Member; Myanmar’s Entry Blocked at Last Hurdle

When asked if plans are afoot to re-negotiate the terms of some of the loans with China, Ameer said that there was “not yet a decision on re-negotiating”.

In New Delhi, Solih’s visit is largely viewed as an opportunity to provide the final push to finish projects which were delayed by the previous administration.

This includes completing the installation of the coastal surveillance system and handing over a Dornier aircraft. These two proposals were part of the 2016 Indo-Maldives MoU on defence cooperation, but could not be completed for several reasons.

“We have a couple of radars left to be installed, which were largely delayed as the Maldives was not giving visas to Indian technical staff,” said a senior government official.

The Yameen government had repeatedly asked for the Dornier aircraft, but India kept Malé waiting after the latter asked New Delhi to take back its two Advanced Light Helicopters.

Meanwhile, Indian officials are also expecting to renew the lease agreement for the two choppers.

However, there are no comprehensive defence agreements being contemplated at this stage. “We are not looking at the defence side immediately. The main priority right now is to complete the unfinished projects,” said a senior government official.