Prime Minister Narendra Modi reaffirmed the Maldives’ pivotal role in India’s ‘Neighborhood First’ policy and SAGAR (Security and Growth for All in the Region) vision during a crucial meeting with Maldivian President Mohamed Muizzu on October 7. This meeting marks a significant moment in restoring bilateral ties between the two nations after a year of strained relations.
PM Modi, speaking after the talks, emphasised the centuries-old relationship between India and the Maldives. He stated, “India and Maldives relations are deeply rooted in history. As Maldives’ nearest neighbor and close friend, India has always played the role of first responder during times of crisis.” He further stressed that the Maldives holds a key position in India’s neighborhood policy and regional security initiatives, highlighting India’s role in supporting the island nation during economic and environmental challenges.
President Mohamed Muizzu’s visit comes at a critical juncture. After assuming office in November 2023, Muizzu campaigned on an ‘India Out’ platform, calling for the removal of Indian military personnel stationed in the Maldives. His stance had caused a diplomatic rift between the two countries, making this visit an essential step towards mending relations.
This is Muizzu’s first official visit to India, and it follows earlier state visits to Turkey and China, which signaled a shift in the Maldives’ foreign policy. However, the Maldives’ precarious economic situation, coupled with India’s indispensable role in the region, seems to have brought both countries back to the negotiation table.
Despite the initial strain, both leaders reaffirmed their commitment to strengthening bilateral relations. PM Modi emphasised that India remains a steadfast ally of the Maldives, particularly in areas of economic support, maritime security, and regional stability. He also noted that both countries share a vision for a comprehensive partnership in economic and maritime security.
India’s Financial Support and Infrastructure Boost
During the meeting, PM Modi announced significant financial aid to assist the Maldives as it grapples with an economic downturn. India has rolled over $100 million of the Maldives’ Treasury Bench through the State Bank of India (SBI). Additionally, PM Modi revealed a new $400 million currency swap agreement to help stabilise the Maldivian economy. This support comes as the Maldives faces a looming debt crisis, with foreign exchange reserves dangerously low, barely covering six weeks of imports.
India’s economic aid extends beyond financial assistance. Both leaders also inaugurated the redeveloped Hanimaadhoo International Airport, a key infrastructure project funded by India. The airport’s redevelopment is expected to boost the Maldives’ tourism industry, which is a cornerstone of the nation’s economy. The upgraded facility will help attract more international tourists to the Maldives’ renowned luxury resorts and pristine beaches, providing much-needed revenue for the struggling economy.
“India remains fully committed to supporting the Maldives in its development journey. Our development partnership is a key pillar of India-Maldives relations, and we have always prioritised the needs of the Maldivian people,” PM Modi said during the meeting. The PM emphasised that India’s financial and infrastructural assistance is aligned with the Maldives’ development goals and is designed to address the immediate challenges the country is facing.
Strengthening Cooperation: MoUs Signed
Several key agreements were signed during President Muizzu’s visit, further solidifying India-Maldives cooperation in various sectors. Among the most notable were the agreements on using India’s RuPay card in the Maldives, which will facilitate transactions for Indian tourists and promote tourism. Additionally, a Memorandum of Understanding (MoU) was signed between India’s Rashtriya Raksha University and the Maldives’ National College of Policing and Law Enforcement, focusing on training and capacity building.
Other significant agreements included an MoU between the Central Bureau of Investigation (CBI) of India and the Anti-Corruption Commission of Maldives to cooperate on combating corruption. Two other MoUs were renewed, covering training and capacity-building programs for Maldivian judicial officers and cooperation in the field of sports and youth affairs.
Maldives’ Economic Struggles Highlighted
President Muizzu’s visit also brought to light the dire economic situation in the Maldives. According to reports, the country’s foreign exchange reserves have fallen to $440 million, barely enough to cover one-and-a-half months of imports. The Maldives faces a potential debt default as its total debt, as of March 2024, stands at $8.3 billion, which is 110.1 per cent of its GDP. This debt includes $3.4 billion in external obligations, with $1.11 billion owed to China, representing a significant portion of the country’s financial burden.
In September, the global credit rating agency Moody’s downgraded the Maldives’ credit rating, citing increased default risks. Moody’s warned that the Maldives would face external debt payments of $600 million in 2025 and over $1 billion in 2026, while its foreign reserves remain critically low. The Maldives’ financial predicament has prompted it to seek international assistance, with President Muizzu appealing to India, China, and Gulf nations for aid.
India’s crucial role in the Maldives’ Recovery
India has been at the forefront of providing financial assistance to the Maldives throughout 2024. Earlier in May, India extended crucial budgetary support by rolling over a $50 million Treasury Bill at the special request of the Maldivian government. In September, India provided an additional $50 million through a Treasury Bill extension, demonstrating New Delhi’s continued commitment to supporting the Maldives during its economic crisis.
Beyond financial aid, India’s cooperation with the Maldives in sectors such as trade, energy, defense, and maritime security is expected to bolster the island nation’s long-term recovery. President Muizzu acknowledged India’s vital role in helping the Maldives navigate its economic challenges. “India is fully cognizant of our fiscal situation, and as one of our biggest development partners, it will always be ready to ease our burden and find solutions to the challenges we face,” Muizzu said during the meeting.
Despite the challenges in their relationship over the past year, both PM Modi and President Muizzu expressed optimism about the future of India-Maldives relations. The shared commitment to economic growth, regional security, and a comprehensive development partnership is expected to drive future cooperation between the two nations.
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