India Extends Major Financial Aid to Support Maldives’ Struggling Economy
India has pledged substantial financial assistance to the Maldives to bolster its struggling economy. The announcement came after Maldivian President Mohammed Muizzu met with Indian Prime Minister Narendra Modi during his five-day visit to India.
Financial Support to Strengthen Maldives’ Economy
India’s aid package includes a $400 million currency swap agreement, alongside an additional 30 billion rupees ($357 million) in another swap deal. These agreements will allow businesses in both countries to trade in local currencies rather than relying on US dollars, helping to ease the Maldives’ foreign exchange crisis.
Improving Relations Between Maldives and India
President Muizzu’s visit marked a significant improvement in relations between the two nations, which had become strained after Muizzu took office in November 2023. During the visit, Prime Minister Modi described the discussions as opening “a new chapter” in bilateral ties, assuring that “India will always be there for the progress and prosperity of the people of Maldives.”
Relations between Male and Delhi had deteriorated after Muizzu’s earlier diplomatic moves, including his decision to visit Turkey and China instead of India soon after his election. However, economic challenges in the Maldives, including dwindling foreign reserves and the threat of a debt default, have prompted the Maldives to strengthen ties with India.
Maldives’ Economic Struggles
With foreign exchange reserves down to $440 million, enough for just one and a half months of imports, the Maldives faces an urgent need for economic relief. President Muizzu acknowledged the crucial role India’s financial assistance will play in addressing the nation’s foreign exchange issues. He added that he had “extensive discussions” with Modi on future collaborations between the two nations.
Free Trade Agreement Talks and Diplomatic Shifts
In addition to the financial support, India and the Maldives agreed to begin talks on a potential free trade agreement. This development signals a shift in Muizzu’s stance, moving away from his earlier anti-India rhetoric, which included allowing a Chinese research vessel to dock in the Maldives—a move that displeased India.
While Muizzu had previously been seen as favoring closer ties with China, he now emphasizes a “Maldives First” policy, asserting that his administration is open to dialogue with India. Despite maintaining relations with China, which has extended $1.37 billion in loans to the Maldives, Muizzu’s government seems focused on balancing relations with both India and China to navigate its economic challenges.
