India Extends Major Financial Aid to Maldives, Strengthening Ties with President Mohamed Muizzu
India has pledged hundreds of millions of dollars in financial assistance to the Maldives to support its struggling economy. The agreement was reached after Maldivian President Mohamed Muizzu held talks with Indian Prime Minister Narendra Modi during a five-day visit to India.
The aid package includes a $400 million currency swap deal, along with an additional 30 billion rupees ($357 million) in a separate swap arrangement. This will enable businesses to trade in local currencies instead of relying on US dollars.
President Muizzu was received with a red carpet welcome, signaling an improvement in relations that had soured in recent months. Prime Minister Modi hailed the visit as a “new chapter” in the countries’ ties, stating, “India will always support the progress and prosperity of the Maldivian people.”
This financial support and the positive diplomatic tone represent a significant shift in the relationship between Male and Delhi, which had become strained since Muizzu took office in November 2023. Muizzu’s earlier visits to Turkey and China, especially his January trip to Beijing, were viewed as a snub to India, as previous Maldivian leaders traditionally visited Delhi first after assuming office.
Further tension arose when three Maldivian officials made derogatory remarks about Prime Minister Modi. However, analysts suggest that the Maldives’ struggling economy has prompted its leadership to seek improved relations with India.
The Maldives is on the brink of a debt default, with foreign exchange reserves standing at just $440 million, enough to cover only one-and-a-half months of imports.
On Monday, Muizzu said his discussions with Modi focused on shaping future collaboration between the two nations. He expressed gratitude for India’s support, noting that it would be vital in addressing the country’s foreign exchange challenges.
The two countries also agreed to begin negotiations on a free trade agreement. Prior to his meeting with Modi, Muizzu told the BBC that he expected India to assist the Maldives, as it has done in the past, and acknowledged India’s key role as a development partner.
“We are confident that any differences can be resolved through open dialogue and mutual understanding,” he said, without directly addressing his previous anti-India stance.
This marks a shift from some of Muizzu’s earlier actions, which were viewed as attempts to reduce India’s influence and strengthen ties with China. In February, his administration allowed a Chinese research vessel to dock in the Maldives, which raised concerns in Delhi about potential military data collection by China.
Despite being perceived as leaning toward China, Muizzu has rejected the pro-China label, emphasizing his “Maldives First” policy. However, the Maldives continues to rely on China, which has extended $1.37 billion in loans to the country.
