India has pledged hundreds of millions of dollars in financial aid to the Maldives, aimed at supporting the island nation’s struggling economy. This agreement was finalized following discussions between Maldivian President Mohammed Muizzu and Indian Prime Minister Narendra Modi during Muizzu’s five-day visit to India.
As part of the support, India has agreed to a $400 million currency swap deal, along with an additional ₹30 billion ($357 million) in another swap agreement. These agreements will enable businesses to trade in local currencies instead of relying on the US dollar, easing economic pressures on the Maldives.
A Boost in India-Maldives Relations
The red carpet welcome for President Muizzu signals a positive shift in India-Maldives relations, which had recently deteriorated. Modi described Muizzu’s visit as marking a “new chapter” in bilateral ties. “India will always be there for the progress and prosperity of the people of Maldives,” Modi stated during the talks.
This significant financial package highlights an improvement in relations between the two countries, strained since Muizzu’s rise to power in November 2023. Muizzu’s previous diplomatic decisions, including visits to Turkey and China before India, were seen as distancing the Maldives from Delhi.
Rebuilding Economic Ties Amid Debt Crisis
The Maldives is currently facing a dire economic situation, with foreign exchange reserves dwindling to $440 million—barely enough to cover one-and-a-half months of imports. Economic analysts believe this crisis has pushed the Maldivian leadership to seek stronger ties with India.
During his visit, President Muizzu expressed gratitude for India’s support, noting that the financial assistance would be “instrumental in addressing foreign exchange issues.” He revealed that he had “extensive discussions” with Modi to map out a future collaborative framework between the two nations.
In a further boost to economic cooperation, India and the Maldives have agreed to begin negotiations on a free trade agreement. This move is seen as part of a broader effort to enhance trade relations and ease economic challenges faced by the Maldives.
Muizzu’s Shift in Tone
In a marked contrast to his earlier stance, Muizzu acknowledged India’s crucial role in the Maldives’ development. He noted that India, as one of the Maldives’ biggest development partners, has historically been ready to assist during difficult times. “We are confident that any differences can be addressed through open dialogue and mutual understanding,” he said.
While Muizzu had previously sought to reduce India’s influence in favor of closer ties with China, his recent statements reflect a more balanced approach to foreign relations.
China’s Continued Influence
Despite the renewed warmth in India-Maldives relations, Muizzu’s administration continues to maintain ties with China, which has extended $1.37 billion in loans to the Maldives. In February, his government allowed a Chinese research ship to dock in the Maldives, raising concerns in Delhi. However, Muizzu has dismissed the notion that his government is aligned with Beijing, asserting that his foreign policy prioritizes the interests of the Maldives.
Muizzu’s visit to India and the accompanying financial package mark a significant turning point in India-Maldives relations. As the Maldives faces an economic crisis, this renewed partnership with India could provide much-needed stability and pave the way for deeper economic cooperation in the future.
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