In recent regional developments India has extended a helping hand to the Maldives by rolling over a $50 million treasury bill while Pakistan’s finance minister claims that the ongoing tensions with India will not significantly affect its fiscal stability. These events highlight the complex dynamics of financial aid regional relations and economic resilience in South Asia.
India’s Financial Aid to the Maldives
India has a long history of supporting its neighbors and its recent financial assistance to the Maldives is a clear example of this commitment. On May 12, 2025 India announced the rollover of a $50 million treasury bill for another year interest free at the request of the Maldivian government. This means that the Maldives does not have to repay the amount immediately giving it more time to manage its economy and implement fiscal reforms. The State Bank of India (SBI) has been facilitating this arrangement since March 2019 making it a consistent part of India’s “Neighbourhood First” policy.
The Maldivian government has expressed deep gratitude for this support. Foreign Minister Abdulla Khaleel took to X to thank India’s External Affairs Minister, Dr. S. Jaishankar and the Indian government stating that this assistance reflects the strong friendship between the two nations. He emphasized that the rollover will help the Maldives carry out fiscal reforms to achieve economic stability.
The Maldives is facing significant economic challenges with a public debt of $9.4 billion which is over 134% of its GDP according to World Bank data. Low foreign exchange reserves and the risk of default have made India’s support crucial. This financial aid combined with India’s earlier decision to extend a special quota for exporting essential commodities to the Maldives shows New Delhi’s dedication to helping its neighbor during tough times.
This move also has strategic importance. The Maldives is a key player in the Indian Ocean region and both India and China compete for influence there. By providing interest free financial support India strengthens its ties with the Maldives reinforcing its role as a reliable partner. This assistance not only helps the Maldives economically but also deepens the bilateral relationship fostering regional stability.
Pakistan’s Fiscal Space Amid India Conflict
On the other hand Pakistan is navigating its own economic challenges made more complex by recent tensions with India. A four day military standoff in May 2025 triggered by an attack on Hindu tourists in Indian administered Kashmir led to significant financial losses for both countries. Analysts estimate that the conflict cost around $1 billion per hour with total losses reaching $80-90 billion. Pakistan however bore a smaller share of the losses compared to India due to differences in military expenditure and economic scale.
Despite these losses Pakistan’s Finance Minister Muhammad Aurangzeb stated on May 12, 2025 that the conflict would not have a large fiscal impact and could be managed within the country’s current fiscal space. This means Pakistan believes it has enough budgetary flexibility to absorb the financial strain without needing a new economic assessment.
Pakistan’s confidence stems from recent financial support from the International Monetary Fund (IMF). In September 2024 the IMF approved a $7 billion bailout package for Pakistan followed by a $1.4 billion loan under the Resilience and Sustainability Facility (RSF) in May 2025. These funds have helped stabilize Pakistan’s economy with gross foreign exchange reserves rising to $10.3 billion by April 2025 and inflation dropping to 0.3%. The IMF has noted Pakistan’s progress including a fiscal surplus of 2% of GDP in the first half of FY2025.
However India has raised concerns about these IMF loans. During a May 9, 2025 IMF board meeting India abstained from voting on a $1.3 billion loan to Pakistan citing its poor track record in managing past bailouts and the potential misuse of funds for state sponsored terrorism. India’s foreign secretary also alleged that financial aid has indirectly supported terrorist groups like Lashkar-e-Taiba and Jaish-e-Mohammed. Despite India’s objections the IMF approved the loans highlighting the geopolitical tensions in the region.
Implications for the Region
The contrasting financial situations of the Maldives and Pakistan reveal the broader economic and political dynamics in South Asia. India’s aid to the Maldives strengthens its position as a regional leader fostering goodwill and stability in the Indian Ocean. Meanwhile Pakistan’s reliance on IMF bailouts coupled with its ongoing tensions with India underscores the challenges of achieving longterm economic stability in a volatile geopolitical environment.
For the Maldives India’s support provides breathing room to address its debt crisis and implement reforms. However the country must balance its relationships with India and China both of whom are major creditors. For Pakistan the IMF loans offer temporary relief but the country’s history of frequent bailouts raises questions about its ability to achieve sustainable growth. The recent conflict with India though short lived highlights the economic risks of military escalations.
Conclusion
India’s $50 million treasury bill rollover to the Maldives and Pakistan’s claim of fiscal resilience amid conflict with India reflect the diverse economic challenges and strategies in South Asia. India’s financial aid to the Maldives strengthens bilateral ties and supports regional stability while Pakistan’s dependence on IMF loans underscores the need for deeper reforms. As both nations navigate their economic paths their ability to manage debt implement reforms and maintain regional peace will shape the future of South Asia.