Maldives repays $150 million loan to India, impacting foreign reserves

Key Facts

• Maldives repaid the final $50 million tranche of a $150 million loan from India on 17 September 2026.
• The loan comprised treasury bills subscribed by the State Bank of India (SBI) in 2019 and was extended annually six times.
• India bore approximately $45 million in interest payments over five years, while Maldives repaid the principal amount.
• After repayment, Maldives' foreign exchange reserves fell below $600 million, standing at $643.8 million as of August 2026.
• India provides ongoing financial support to Maldives via an INR 30 billion currency swap facility and has subscribed to $350 million worth of Maldivian treasury bonds maturing in 2029 and 2030.

Background & Context

The $150 million loan facility was extended by India's State Bank of India to support Maldives' budgetary and economic needs, particularly during periods of fiscal challenges. The facility's multiple annual extensions and India's absorption of interest payments relieved financial pressure on the Maldives government. This financial assistance forms a key component of India's Neighbourhood First policy, which focuses on strengthening strategic and economic partnerships with neighboring countries including the Maldives. Besides treasury bills, India’s financial cooperation also involves currency swap arrangements and bond investments to stabilize Maldives' external financial position.

Why This Matters for Exams

This event is significant for understanding bilateral financial relations between India and Maldives, especially India's strategic approach to regional partnerships through economic assistance. Key exam topics that may be derived include treasury bills and their role in government borrowing, impact on foreign exchange reserves, currency swap mechanisms, and India's strategic foreign policy India’s Neighbourhood First policy. Comprehension of international financial instruments and macroeconomic implications of loan repayments is critical for competitive exams.

Points to Remember

• The loan of $150 million was provided in 2019 by the State Bank of India and fully repaid by Maldives on 17 September 2026.
• India bore the entire interest cost of about $45 million over five years, easing Maldives' debt servicing burden.
• The repayment lowered Maldives’ foreign exchange reserves to below $600 million as of August 2026.
• An INR 30 billion currency swap facility remains active between India and Maldives to aid financial stability.
• India holds $350 million in Maldivian treasury bonds with maturities in 2029 and 2030, reflecting ongoing financial support.
• This loan and support exemplify India's Neighbourhood First policy aiming at sustainable regional relations.

Practice MCQs

Question 1

1. When did Maldives repay the final tranche of the $150 million loan from India?
2. 2019
3. 2024
4. 2026
5. 2023

Answer: 2026

Question 2

1. Which Indian bank subscribed to the treasury bills loaned to Maldives?
2. Reserve Bank of India
3. State Bank of India
4. Punjab National Bank
5. Bank of Baroda

Answer: State Bank of India

Question 3

1. Approximately how much interest did India pay on Maldives' loan over five years?
2. $15 million
3. $30 million
4. $45 million
5. $60 million

Answer: $45 million