India’s Cabinet has approved the extension of $25 million as budget support loan to the government of Maldives.

Indian papers reported that the Cabinet made this decision yesterday.

The Indian government had agreed in 2011 to extend $100 million to Maldives, inclusive of $50 million as credit facility. The Indian Cabinet made the decision to reduce the credit facility to $25 million, and extend the remaining $75 million as budget support to the government of Maldives.

The Parliament’s Finance Committee had granted approval last Sunday to Finance Ministry to obtain additional $25 million as budget support.

Finance Minister Abdullah Jihad has said that difficulties will arise in paying salaries this month, unless this money is secured.

India had earlier extended $25 million out of the $100 million loan promised during SAARC Summit last year. An agreement was also signed earlier this month between the Indian government and Maldivian government for the provision of $25 million.

The $100 million loan should be repaid to the Indian government in 10 years with an annual interest rate of 1.5 percent.