Trade Tensions: India's Concerns Over Maldives' Economic Alliances

India has expressed concerns about recent trade agreements signed by the Maldives with China and Turkey, fearing they could adversely affect the Maldivian economy. These agreements might increase the balance of payments deficit and customs duty losses, impacting fiscal stability, amid substantial external debt challenges.

India's recent expression of concern highlights the economic fragility of the Maldives, a nation strategically located in the Indian Ocean region. The Indian foreign ministry noted the potential negative impacts of trade agreements the Maldives has signed with China and Turkey, which could worsen the small island nation's financial instability.

These pacts, including a free trade agreement with China effective from January, may increase the Maldives' balance of payments deficit and lead to customs duty losses. Analysts warn these changes could disrupt supply chains and jeopardize long-term fiscal stability due to increased dependency on foreign goods and services.

The Maldives embassy in New Delhi has not responded to inquiries, and much of its foreign debt remains with China and India. Ongoing discussions about a $400-million bilateral currency swap and a prospective free trade agreement with India underscore the critical need for securing multilateral financing to bolster reserves.

(With inputs from agencies.)