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What is the Maldives economic crisis and why did India announce $1.4 billion aid to the island nation?

India will give financial assistance of 1.4 billion USD to the Maldives, Prime Minister Narendra Modi said on Monday, the biggest aid yet to the Indian Ocean island nation that is grappling with debt from a Chinese building spree.

Modi made the announcement after talks with Maldives’ new president, Mohamed Ibrahim Solih, who defeated the pro-China strongman Abdulla Yameen in a surprise election result in October and is trying to reset ties with India.

Modi said India stood ready to help the Maldives as a close friend and neighbour.

“For Maldives’ social and economic development we are providing a financial assistance of 1.4 billion USD in the form of budgetary support, currency swap agreements and concessional lines of credit,” he said during a brief media appearance with Solih.

What all did China build in the Maldives?

China’s infrastructure development in the Maldives included a bridge linking Male (Maldives’ capital) and the airport, and construction of housing units.

While the new government under Solih is still trying to figure out the dire economic situation, the Chinese debt is estimated to be between 1.5 to 3 billion USD.

But to understand this, let us first know why the ties between India and Maldives plunged to an all-time low in the first place.

The Maldives neither participated in the multi-national ‘MILAN’ naval conclave, a congregation of littoral navies conducted biennially by the Indian Navy at the Andaman and Nicobar Islands, which was held in mid-March this year, nor did its defence minister led his country’s delegation to take part in the Defence Expo 2018. Why?

Background of the Maldives economic crisis

1. The Maldives, on February 1, 2018, plunged into crisis after the Supreme Court quashed terrorism convictions against nine leading opposition figures including the exiled, first democratically elected president, Mohamed Nasheed.

2. Tensions came to a head when Abdulla Yameen’s government rejected the ruling and imposed an emergency on Monday, February 5, 2018, and then in the early hours of Tuesday morning arrested the chief justice Abdulla Saeed, another judge and several politicians, including Maumoon Abdul Gayoom, former Maldives president, and Yameen’s half-brother.

3. Gayoom ruled the Maldives for 30 years until 2008 and now stands with the opposition.

4. By Tuesday evening, Yameen appeared to have gotten his way with the court when he lifted his suspension of an article of the constitution that establishes the Supreme Court as the final authority on legal matters.

5. The three remaining judges of the Supreme Court overturned the ruling ordering the release of the nine politicians and Abdulla Yameen’s regime rammed a 30-day extension of the state of emergency through the Majlis of Parliament on February 20.

6. He then appointed a new chief justice after removing his predecessor for ordering the releases and sacked two police chiefs.

7. Meanwhile, Nasheed, who was granted asylum by Britain after the Male government allowed him to leave jail for medical treatment abroad in 2016, sought Indian intervention to resolve the nation’s most serious political crisis in years.

8. He urged regional power India to send an envoy backed by its military to release Maldivian political prisoners.

“On behalf of Maldivian people, we humbly request: India to send an envoy, backed by its military, to release judges & pol. detainees… We request a physical presence,” Nasheed said in a Twitter post.

9. He also urged the United States to block the financial transactions of Yameen’s government.

10. India’s ties with Maldives nose-dived because it criticised the Abdulla Yameen government for imposing a 45-day emergency in the archipelago nation.

11. India, the United States, and Britain had urged Yameen to honor the rule of law and free the detainees.

12. India had also criticised Yameen’s decision to hold elections in September saying the rule of law should be restored before embarking on such an exercise.

Why was an Emergency declared by the Yameen government?

Since Yameen took power in 2013, his government has faced heavy criticism over the detention of opponents, political influence over the judiciary and the lack of freedom of speech.

Addressing the nation on state television, Yameen said he had acted to prevent a coup, and suggested that the judges had chosen to side with his opponents because they were being investigated for corruption.

“I declared the state of emergency because there was no way to hold these justices accountable. This is a coup. I wanted to know how well planned this coup is,” he said.

Maldives external debt to China

The influence of China on the Maldives, an island nation in the Indian Ocean, considered a backyard of India, has been growing and it is seen as a concern in New Delhi.

China opened an embassy in the Maldives in 2011 and since then, has rapidly built ties with the tropical island chain as part of its Belt and Road Initiative. It says it is opposed to any country interfering in the internal affairs of the Maldives.

In 2012, the Yameen administration terminated a contract with an Indian company to renovate the country’s airport in favour of a Chinese company.

Last year, the government pushed a trade agreement with China through parliament without debate, eliminating tariffs on 95 per cent of Chinese goods over eight years.

According to the daily, as part of Xi Jinping’s Belt and Road Initiative, Beijing granted loans and sent state-owned companies to develop the Maldives ports and other public works.

A new International Monetary Fund report projects the Maldives’ external debt will hit 51.2 per cent of GDP in 2021 from 34.7 per cent in 2016 as a result of the projects.

Current situation between India and the Maldives

1. India stands ready to work with the Maldives to strengthen maritime security and help expedite inclusion of its Indian Ocean neighbour in the Commonwealth again, president Ram Nath Kovind said on Monday.

2. Welcoming newly-elected Maldivian president Ibrahim Mohamed Solih, President Kovind said that along with strengthening bilateral relations, both countries must also enhance partnership on global issues.

“Climate change needs urgent attention and action. We are deeply concerned of its impact, and especially so on the Maldives and other small island states that are most vulnerable to it,” he said.

3. The president said India is honoured that Solih has chosen to visit the country on his first State Visit and that too, within a month of assuming office.

4. Welcoming the Maldives into the Indian Ocean Rim Association as its newest member, Kovind said India invites the country to join the International Solar Alliance.

Full details are available at the link below:

Source URL: Google News

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