In his maiden Independence Day address after assuming office last November, Maldives’ President Mohamed Muizzu recently thanked India for helping to strengthen his country’s fragile economy. He placed India and China in the same basket, yes, but even that’s saying a lot in the backdrop of his government’s recent positions viz New Delhi and simultaneous over-arching proximity to Beijing, especially in sensitive security matters in the early months of his regime.
Recently, Muizzu received Indian High Commissioner Munu Mahawar, indicative of how the ties would be shaped in the coming days. As if in continuation thereof, the Maldivian government restored medical evacuations using a Dornier aircraft, gifted by New Delhi on the specific request of his estranged political mentor and former President Abdulla Yameen—but after replacing Indian military pilots with civilian personnel, as far back as May. Muizzu had made pilot replacement a part of his poll promise last year and promptly thanked New Delhi for the present restoration after anti-India sections of the social media had speculated that the Dornier and its civilian pilots had been grounded for good.
In his turn, Maldivian Tourism Minister Ibrahim Faisal led the nation’s travel trade team on a five-day roadshow in Delhi, Mumbai, and Bengaluru, to boost tourist arrivals in the new season, beginning in November. Tourism is the nation’s economic mainstay, and India was the top source market for Maldivian tourism until arrivals dropped drastically after three junior ministers posted defamatory material on Prime Minister Narendra Modi for ‘marketing’ Lakshadweep as a tourism destination.
Internal evaluation
The seeming easing of tensions in Maldivian ties with the larger northern neighbour began showing when Muizzu became the only neighbourhood leader to take a team of senior officials to the Modi 3.0 swearing-in, on invitation. It was also indicative of his willingness and preparedness to engage in serious discussions with the hosts—to take the bilateral relationship forward quickly.
In New Delhi, Team Muizzu engaged in substantive discussions with the Indian delegation led by External Affairs Minister (EAM) S Jaishankar, who was continuing in the position he had held under Modi 2.0. Conventional wisdom has it that if ties are as good as they look post-visit, a senior Indian diplomat(s) should be doing to ‘return honour’, to take forward the outcomes of the Delhi discussions. The indication was that the talks flowed from Maldivian proposals on the economic front.
More than its predecessors, the Muizzu government readily acknowledges the economic crisis facing the country. It includes a debt crisis, about which both the International Monetary Fund (IMF) and the World Bank had cautioned the nation under predecessor President Ibrahim ‘Ibu’ Solih, by end-2022. That was a year before Muizzu had become President. The government too has since acknowledged the looming debt crisis and senior ministers and officials are becoming increasingly frank in their expression.
Muizzu in his Independence Day speech and otherwise, too, has acknowledged how India was among the nations to defer debt repayment, when due. India did it once earlier as the request for a ‘roll-over’ facility came almost at the last minute. Another rollover is promised for the coming months. According to reports, both China and the United Arab Emirates (UAE) too have granted a five-year extension on debt repayment by Maldives.
Budgetary support
For many months now, Maldivian experts have also indicated an urgent and continual need for pumping in cash, which comes either in the form of ‘budgetary support’, as used to be the case with fiscal assistance from India through the past years, or as a ‘bail-out’ package from the International Monetary Fund (IMF). Even in the fourth year of the Solih government, New Delhi had extended a US$ 100 million aid in budgetary support. This was apart from the massive, first-of-its-kind, US$ 1.4 billion developmental funding from India at the commencement of Solih’s five-year presidency in 2018, and to which further aid was added later, especially in the face of the unprecedented COVID pandemic.
The alternative to budgetary support from friendly countries is the IMF route, once tried in the past by the nation’s first democratic President, Mohammed ‘Anni’ Nasheed (2008-12). Looking back, Maldivians concede that the IMF-imposed reforms, which introduced new taxes, hiked power tariff and cut public sector jobs and pays were among the causes for the nation’s most charismatic leader losing some of his popularity across the country, almost overnight. This worked against him when the political Opposition in the garb of ‘religious NGOs’ launched the ‘December 23 Movement, leading to month-long anti-government protests and the President’s abrupt resignation.
Dues collection
Indications are that the incumbent government’s expectations of ‘budgetary support’ of the Indian kind from at least two other ‘friendly nations’ have not materialised. After India and China, Kuwait has now come up with MVR 150 m (US$ 10 m) assistance for small-islands hospitals projects.
Incidentally, following Foreign Minister Moosa Zameer’s recent visit to Beijing, Muizzu announced that the bilateral Free Trade Agreement (FTA), which Yameen as President had rushed through Parliament but did not proceed from there with the same haste, would be implemented from September. The government has since indicated that the China-FTA would help improve foreign currency inflows, and has also claimed that discussions were continuing for signing similar agreements with the UAE and the UK.
Efforts have been made to open a Chinese bank in Maldives. For long, the public sector State Bank of India (SBI) has been a major player in development funding in the country, particularly in the private sector. The new pro-active governmental initiatives on the forex front also include a ban on exporting raw fish, after setting up more processing units with Chinese assistance.
In between, the Muizzu dispensation has initiated a massive dues-collection drive nearer home, through Parliament’s Public Accounts Committee (PAC)—chaired by Deputy Speaker, Ahmed Nazim, in turn, a cousin of the President and a recent tough-talker on the economy—with the claim and hope of meeting much if not all of the nation’s external debt-commitments. The quoted figure is MVR 15 billion, or US$ 500 million (appx), but attempts at forced collection could prove dicey as the country’s big business, including the mainstay tourism sector, controls not only the economy but also politics—as often designates itself as the ‘king-maker’ in election time.
Under an archaic facilitation law introduced when the country was attracting tourism investments close to 50 decades ago, resort-promoters and lessees retain the dollars and other foreign currencies that they earn, without having to convert them into the local currency for regular consumption. The question is if it is time for the government/nation to revisit the law, or will it be forced to do so if it approaches the IMF for a bail-out package, along with other conditionalities.
Restoring pre-poll ties
Local media reports quoting official statistics have said that at the end of June, the forex reserves were ‘insufficient to meet one month’s essential imports’. This implies a precarious ship-to-mouth existence. Incidentally and without reference to the forex situation, a ship-load of 800 tonnes of perishables, including eggs, potatoes and onions—the third shipment since the commencement of the service on 10 July—arrived in the southern Addu City from India’s Thoothukudi Port, recently. The direct ship service would help avoid transhipment through Malé, with avoidable delays and wastage.
However, larger issues, if any, should flow from Muizzu’s provocative public assertion as far back as January that he was ending single-source import-dependence (from India) for essentials, and had entered into an agreement with distant Turkiye for round-the-year supply of staples like rice, flour and sugar. Yet, when those imports did not materialise during the year’s Ramadan season as pronounced, New Delhi did not stand on formality when approached for continuing the regular supplies.
Overall, the immediate Maldivian expectations from reviving the pre-poll ties with India could include both budgetary support and commodity exports, maybe with a deferred payments facility. India had done it in a much bigger way for common neighbour Sri Lanka when faced with an unprecedented forex crisis two years back—but it did so without linking what amounted to emergency assistance to New Delhi’s security concerns viz China. However, in Sri Lanka’s case, there was no seemingly wanton pro-active provocation of the Maldivian kind.
Questions have since been raised about India’s aid provision for Maldives in the annual budget ‘going down’ to INR 400 crores from the previous year’s INR770 crores. The fact is that the initial provision during the last fiscal (April-March) was also INR 400 crore, but New Delhi did not cringe when it came to nearly doubling that provision as the year rolled by.
source : observer research foundation