The Maldives-China Free Trade Agreement (FTA) will come into effect in September, and the country hopes to sign a similar agreement with India, President Mohamed Muizzu said on Friday during the official ceremony marking the nation’s 59th Independence Day. The Maldives was similarly working towards FTAs with Turkey and the UK, and hopes to sign one with India as well, Muizzu said.
Economic Minister Mohamed Saeed had, in May, said that an FTA with India had been proposed — with India, at the time, denying any movement on an agreement but expressing an openness to engage.
The first attempt to reach an FTA with China began during the Abdulla Yameen Abdul Gayoom administration. While all elements had been formalised, the Ibrahim Mohamed Solih administration, which followed and was led by the Maldivian Democratic Party (MDP), decided against the practical implementation of the agreement, choosing instead to prioritise bilateral relations with India while largely freezing out China.
According to Muizzu, the FTA with China will result in duty relief on a total of 7,897 items across nine sectors, including for 298 species of fish exports. Once it comes into effect, the Maldives will be exempt from export taxes on those products to China.
The proposed FTA with Turkey will possibly result in duty relief on 53 items exported to the country and some duties will be eliminated altogether, Muizzu said.
The President also explained that the administration was working towards a currency swap agreement with China and India, which would facilitate better trade relations with the two nations — making it easier to address the dollar shortage while maintaining economic independence.
The FTA with China will come into force in September and the Maldives is expected to receive a ‘green signal’ to repay its loans to China over five years, Muizzu said.
The Export–Import Bank of China had provided loan financing for several development projects during the Yameen administration and should the loans not be restructured, the Maldives will face significant financial shocks within the current term.
The practical work on restructuring the loans are currently underway and Muizzu believes that that is “the way foreign policy should be shaped to protect the country’s independence.”
He thanked China and India for their assistance in terms of the Maldives’ debt repayment.
“On behalf of the people of the Maldives, I would like to thank the Chinese government and the Indian government for their cooperation in this effort for the sake of the Maldivian people, to ensure our economic independence and to strengthen the economy,” he said.
Of the US$200 million loans rolled over by India, US$50 million was paid when the Muizzu administration came into office; however, with the worsening of the nation’s financial climate the Indian government has been requested for a further rollover of US$50 million.
India has facilitated a two-year food quota and a line of credit, Muizzu said. The line of credit is the same as the US$1 billion line of credit facilitated during the previous administration.
The United Arab Emirates (UAE) has also agreed to defer loan payments over the next five years, he said.
“We are working to manage the economy over the next five years by distributing the [repayment of] loans we have taken for various points in a more convenient manner and implementing the planned measures to ensure economic independence,” the President said.
During the past eight months, MVR 3.8 billion has been paid to cover loans without resorting to debt monetisation, Muizzu said.
