Maldives President Mohamed Muizzu and Indian Prime Minister Narendra Modi engaged in critical talks on Monday, marking a significant step in bolstering strategic cooperation between the two nations as the Maldives seeks to recover from an ongoing economic crisis. During their discussions, Modi announced India’s commitment to extend support through a substantial financial package, including a $400 million and a 30 billion rupee (approximately $357.35 million) currency swap agreement, aimed at stabilizing the Maldivian economy.
The Maldives has faced mounting concerns regarding its economic viability, with fears that it could be the first country to default on Islamic sovereign debt. However, recent support from both China and India has improved the sentiment surrounding the nation’s financial situation. India demonstrated its commitment to aiding the Maldives by providing emergency financial support last month, subscribing to a $50 million treasury bill at the request of President Muizzu’s government. This assistance came shortly after China pledged to enhance trade and investment in the strategically important island nation.
In addition to the financial aid, Modi and Muizzu announced plans to initiate discussions on a free trade agreement, which is expected to further strengthen economic ties and foster mutual growth. “We will work together for stability and progress in the Indian Ocean region,” Modi stated after the bilateral talks, highlighting the importance of cooperation in addressing regional challenges.
The Maldives’ economic struggles can be traced back to the impact of COVID-19, which severely affected the tourism industry, a key revenue source for the archipelago. According to World Bank data, the Maldives owes significant amounts to both China and India, with loans totaling $1.37 billion and $124 million, respectively. As the nation grapples with its financial obligations, the government remains vigilant in seeking additional support to avoid default.
Relations between the Maldives and India had soured after Muizzu’s election in April, as he demanded the replacement of 80 Indian defense personnel stationed in the Maldives as part of his “India out” campaign. Nevertheless, diplomatic engagements and meetings have paved the way for a renewed partnership. President Muizzu acknowledged India’s critical role, stating, “India is a key partner in the socio-economic and infrastructure development of the Maldives and has stood by the Maldives during our times of need.”
As Muizzu embarks on a five-day state visit to India, the discussions between the two leaders signal a commitment to revitalizing bilateral relations and fostering stability in the Indian Ocean region. The outcome of these talks will not only impact the Maldives’ economic recovery but also reshape the geopolitical landscape as both nations navigate the complexities of regional influence.
