Maldivian President Mohamed Muizzu, left, shakes hands with Indian Prime Minister Narendra Modi at Hyderabad House in New Delhi on Oct. 7. © Reuters
NEW DELHI/COLOMBO — India scaled up its development assistance to the Maldives after their respective leaders held talks in New Delhi on Monday, aiming to repair strained ties after the Maldivian President came to power on an “India out” campaign last year.
“Development partnership is an important pillar of our relationship,” Indian Prime Minister Narendra Modi said after holding talks with Maldivian President Mohamed Muizzu, who arrived in the Indian capital on Sunday on a five-day state visit.
Muizzu had earlier visited India in June to attend the swearing-in ceremony of Modi for a third straight term in office but this is his first bilateral visit to India.
Modi pointed out that this year the government-run State Bank of India, the nation’s largest commercial lender, rolled over the Maldives’ treasury bills (T-bills) worth over $100 million. “Today, as per the needs of the Maldives, a currency swap agreement of $400 million and 30 billion rupees ($357.3 million) has also been completed,” he added. “We have also decided to initiate talks on a free trade agreement to strengthen our economic ties.”
India’s financial support is crucial for the Maldives as it faces a debt default with its foreign exchange reserves reportedly dropping to about $440 million, just enough to cover six weeks of imports.
“I would like to thank Prime Minister Modi, the government and people of India for the generous assistance and cooperation extended to the Maldives over the years, including the recent budgetary support in form of rollover of the T-bills,” Muizzu said. He showed appreciation, saying India is a key partner in the socioeconomic and infrastructural development of the Maldives and has stood by the island nation during its times of need.
He also said the bilateral currency swap agreement “will be instrumental” in addressing the foreign exchange issues that Maldives is facing right now.
The World Bank earlier this year cautioned of the risks of the Maldives’ rising public debt, which stood at $8 billion, or 122.9% of the gross domestic product in 2023. “The rising debt obligations could lead to further external vulnerabilities, testing the country’s ability to service its external debt. Average annual debt servicing needs are projected at $512 million for 2024 and 2025, followed by a spike of $1.07 billion in 2026,” it said in a statement in May.
Talking about the overall debt of the Maldives. the New Delhi-based think tank Observer Research Foundation said in a report in August that over $4.8 billion of these loans are domestic, and $3.4 billion are external.
China and India, the regional rivals vying for influence in the strategically-located archipelago, are the top two external lenders to the Maldives.
India has been a key provider of development assistance to the Maldives, often extending financial support on favorable terms. The relations hit turbulence with last year’s election of Muizzu, who is considered pro-China. One of his campaign promises was to remove the fewer than 100 Indian troops stationed in the Maldives for humanitarian and medical evacuation services. That promise was followed through with ahead of the May 10 deadline set by Muizzu, with all such troops currently having been withdrawn.
On the eve of Muizzu’s visit to New Delhi, a senior official in his government told a group of foreign journalists in Colombo that his decision to ask Indian troops to leave the Maldives was “not the first time such a request had been made.”
This was in reference to the politically sensitive issue of Indian military personnel assigned in the Maldives to fly a pair of helicopters and a Dornier aircraft, which were all gifts from India. This added to the anti-Indian tone that emerged during last September’s presidential campaign and continued at the start of Muizzu’s term. New Delhi eventually assigned civilian personnel to the aviation mission, with the official noting that the president wanted “professionals to run the system.”
“Prime Minister Modi and President Muizzu are pragmatic leaders … and they have done what they as leaders were elected for,” added the official.
“We have got bilateral partners who are sensitive to our needs,” the official said shortly before India threw a financial lifeline that enables the Maldives to pay a $25 million coupon payment due on Oct. 8 for a $500 million Sukuk bond, saving the Maldives from being the first country in the world to default from this Islamic financial instrument.
Apart from the currency swap deal, the two countries signed pacts for cooperation in several fields such as preventing and combating corruption, training and capacity building programs for Maldivian judicial officers, sports and youth affairs, and policing and law enforcement. Modi and Muizzu also virtually inaugurated a new runway of the Hanimaadhoo international airport in the Maldives.
souce : asia.nikkei