Maldives President Mohamed Muizzu and Indian Prime Minister Narendra Modi held talks on Monday, with India pledging to bolster strategic cooperation as the Maldives works to recover from its economic crisis.
Modi announced that India had approved a $400 million loan and a currency swap agreement worth 30 billion rupees ($357.35 million), expressing India’s willingness to offer comprehensive support for the Maldives’ infrastructure development.
In recent months, concerns have mounted that the Maldives, facing financial strain, could default on its Islamic sovereign debt. However, confidence has improved following renewed financial backing from both China and India, which are competing for influence in the strategically important archipelago.
Last month, India provided emergency financial assistance by purchasing a $50 million treasury bill at the request of Muizzu’s government, shortly after China pledged to enhance trade and investment in the Maldives.
Modi and Muizzu also announced plans to initiate talks on a free trade agreement between their countries. “We will work together for stability and progress in the Indian Ocean region,” Modi said after their meeting. Muizzu is currently on a five-day state visit to India.
According to World Bank data, the Maldives has significant debts to both China and India, with loans of $1.37 billion and $124 million, respectively. The Maldives’ economic challenges have been exacerbated in recent years, particularly by the collapse of its tourism industry due to the COVID-19 pandemic.
Relations between the Maldives and India faced strain after Muizzu’s rise to power in April, when he called for the replacement of 80 Indian defense personnel stationed in the Maldives as part of his “India Out” campaign. However, diplomatic talks have since improved the relationship.
“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,” Muizzu acknowledged.
