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India's $1.4Bln Financial Assistance to Maldives Not to Repay China's Debt

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Taking an independent stance on foreign policy,the President of the Maldives Mohamed Solih has moved to assure Beijing that the country is committed to maintaining cordial and friendly relations with China, but would like to reassess the interest rates on debt, which is close to 40 percent of the Maldivian gross national product.

Maldivian President Ibrahim Mohamed Solih made it clear that the $1.4 billion financial assistance offered by India would not be used to repay its debt to China. Solih, while speaking to press about his state visit to India, emphasised that the assistance would be solely utilised to develop the country's infrastructure and ease budgetary constraints.

READ MORE: Maldives Prioritises Facilitating Trade, Investment in Country — Minister

The Indian assistance includes $200 million as budgetary support to the Maldives to help ease its cashflow constraints, of which $50 million was grant aid and another $150 million as an investment in treasury bills and bonds at a 1.5 percent interest rate.

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Solih also dismissed the criticism levied by opposition parties over debt and a compromise of national sovereignty.

"I want to assure the Maldivian people today that the nation will not be further indebted because of this", Solih said in his first press briefing since assuming office last month.

READ MORE: India, Maldives to Have Fresh Visa Agreement to Ease Work Permit Issues

India also opened a line of credit of up to $800 million to finance infrastructure projects, while $400 million will to be used as a currency swap to shore up the foreign currency reserve.

It is estimated that the Maldives has accrued over $1.4 billion in debt from China during the previous Yameen regime on various accounts. President Solih said that his government aims to discuss with the Chinese government to offer some leeway into existing agreements.

"We will talk with China into reducing interest rates and maybe extending repayment periods on those loans", Solih assured.    

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