NEWS – India has extended financial assistance to the Maldives by rolling over a $50-million Treasury Bill.

DETAILS OF THE TREASURY BILL SUPPORT

Government-to-Government Arrangement

• Initiated following a request from the Government of Maldives.
• Treasury Bill subscribed by the State Bank of India (SBI).
• Ongoing annual rollovers since 2019.
• Described as a unique emergency financial assistance mechanism.

Statements and Acknowledgements

• Indian High Commission in Malé confirmed the support.
• Maldivian Foreign Minister Abdulla Khaleel expressed gratitude on social media:
  • Thanked Indian External Affairs Minister S. Jaishankar.
  • Emphasized the close friendship and the importance of this support in fiscal reform efforts.

MALDIVES’ ECONOMIC OUTLOOK IN 2024

Tourism Boost

• Tourism is the Maldives’ chief source of foreign exchange.
• In 2024, the country recorded:
  • 2.05 million tourist arrivals – an all-time high.
  • 8.9% increase compared to the previous year.

New Forex Regulations

• New government rule: Tourist resorts must exchange $500 per tourist per month into Maldivian Rufiyaa.
• Result: $214 million exchanged by the tourism sector, enhancing foreign reserves.

INDIA’S BROADER FINANCIAL ASSISTANCE

RBI Currency Swap Facility

• In 2023, the Reserve Bank of India (RBI) extended:
  • $400 million in currency swap support.
  • An additional ₹30 billion in assistance.
• This helped Maldives tide over a severe financial crunch.

UNDERSTANDING TREASURY BILLS (T-BILLS)

What are T-Bills?

• Short-term debt instruments issued by the Government of India.
• Used for raising funds from the market for short durations.

Key Features

• Maturity Periods: 91-day, 182-day, and 364-day.
• Zero-Coupon Securities: Issued at a discount and redeemed at face value.
• No Interest Payments: Investors earn the difference between issue price and face value.

Who Can Purchase?

• Eligible buyers include:
  • Individuals
  • Trusts
  • Institutions
  • Banks
• Main holders are financial institutions due to regulatory and liquidity functions.

Uses in Financial Markets

• Repo Transactions: Banks use T-Bills to borrow funds from the RBI.
• SLR Requirement: T-Bills help banks meet their Statutory Liquidity Ratio norms.

How They Work – Example

• A ₹100 T-bill may be issued at ₹95.
• Upon maturity, the investor receives ₹100.
• Returns depend on liquidity: Higher during liquidity shortages and lower during surplus.