Context:
On May 12, 2025, India announced the rollover of a $50 million Treasury Bill with the Maldives, marking a continuation of its economic support to the island nation. The move highlights India’s commitment to regional cooperation and stability, despite recent diplomatic tensions between the two countries.
What Are Treasury Bills?
Treasury Bills (T-bills) are short-term government debt instruments with maturities typically under one year.
- Used to raise immediate funds for operational needs
- Considered low-risk due to government backing
- Often used in bilateral or multilateral financial assistance programs
- A rollover refers to the reinvestment of funds from a maturing T-bill into a new one, effectively extending the investment duration. In this case, SBI’s rollover of the T-bill for one more year provides the Maldivian government continued access to interest-free funds, which are vital for addressing short-term fiscal pressures.
Background: Maldives’ Economic Crisis:
- The Maldives is grappling with a public debt exceeding 134% of GDP, aggravated by external borrowings and the lingering impact of the COVID-19 pandemic on its tourism-dependent economy.
- Credit rating downgrades and low foreign exchange reserves have further limited its access to new financing.
- India’s subscription to the T-bill, first made in 2023, now stands extended as part of India’s ongoing financial diplomacy in the Indian Ocean region.
Significance of India-Maldives Economic Cooperation:
· Strategic Importance: The Maldives is India’s maritime neighbor in the Indian Ocean and plays a vital role in the success of India’s ‘Neighbourhood First’ policy and regional strategy under Vision MAHASAGAR.
· Stabilizing Influence: Indian financial aid serves as a buffer against overdependence on non-democratic powers, especially amid growing influence from China, a major creditor to the Maldives.
· Diplomatic Outreach: The extension comes on the heels of recent diplomatic frictions, signaling India’s constructive engagement and willingness to maintain open lines of dialogue with Male.
· Soft Power Projection: India’s repeated financial interventions reflect its evolving role as a reliable regional partner, bolstering its image as a first responder in South Asia.
