situation report

South Asia: India Considers Loan for Maldives, Sri Lanka Signs Economic Deals With China

2 MINS READNov 29, 2018 | 16:36 GMT

What Happened: The Indian government is reportedly considering offering $1 billion in soft loans to the Maldives to repay Chinese debt while seeking a permanent military presence on the island nation, Nikkei reported Nov. 28. At the same time, Sri Lankan Prime Minister Mahinda Rajapaksa has signed two agreements with China that include a $32 million contract to develop berth capacity at a container terminal in Colombo, Reuters reported Nov. 29.

Why It Matters: India's Maldives initiative indicates that New Delhi is attempting to expand its military presence in the strategically significant island nation along its periphery. Nearby, China's economic agreement with Sri Lanka is an early sign of how the government of Rajapaksa and President Maithripala Sirisena could influence the geopolitical rivalry between India and China.

Background: The Maldives' current external debt amounts to $1.4 billion or 28 percent of its gross domestic product. China's Export-Import Bank is the country's biggest source of buyer's credit to fund infrastructure projects. Meanwhile, Sri Lanka's ongoing political crisis, triggered by Sirisena's sudden dismissal of Prime Minister Ranil Wickremesinghe, continues after the country's parliament passed a motion to cut funding for Rajapaksa.

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