Maldives President Muizzu Engages India for Economic Support Amid Debt Crisis

Maldives President Mohamed Muizzu arrived in New Delhi on October 6, 2024, for crucial talks with Prime Minister Narendra Modi concerning urgent economic support as the Maldives confronts significant debt obligations. Muizzu aims to negotiate currency swaps and debt relief amidst rising financial pressures and recent downgrades from credit rating agencies. The visit marks a turnaround in relations following a previous campaign critical of India.

On October 6, 2024, Maldives President Mohamed Muizzu arrived in New Delhi for a four-day State Visit to India, where he is scheduled to meet with Prime Minister Narendra Modi on the morning of October 7. This visit occurs amidst a looming economic crisis in the Maldives, with significant debt repayments pending. In a pre-visit interview with an international broadcaster, President Muizzu expressed hopes that India would assist in alleviating the financial burden facing the Maldives, indicating intentions to negotiate a currency swap arrangement and seek debt support during talks at Hyderabad House, following a ceremonial guard of honour at Rashtrapati Bhawan. President Muizzu stated, “India is fully cognizant of our fiscal situation, and as one of our biggest development partners, will always be ready to ease our burden, find better alternatives and solutions to the challenges we face.” In September, India facilitated the Maldives’ urgent needs by announcing that the State Bank of India would subscribe to Maldivian government bonds worth $50 million, providing temporary respite. During his discussions, President Muizzu is expected to request further Indian assistance regarding currency swaps and debt waivers, particularly in light of recent agreements by China to defer loan repayments for five years. The Maldives faces an urgent $25 million payment due on October 8 towards its Islamic bonds, with total debt repayments nearing $1.5 billion over the next two years. The country’s high debt-to-GDP ratio, currently around 110%, coupled with dwindling foreign exchange reserves estimated at $440 million, has led to downgrades by credit rating agencies, which warn of potential default risks akin to the crisis experienced by Sri Lanka in 2022. Prior to his meeting with Prime Minister Modi, President Muizzu had consultations with various Indian officials, including External Affairs Minister S. Jaishankar and Foreign Secretary Vikram Misri, to prepare for the upcoming talks, which are anticipated to result in memorandums of understanding addressing Indian infrastructure investments, security cooperation, and broader bilateral initiatives. In a social media post, Minister Jaishankar stated that President Muizzu’s discussions with Prime Minister Modi would “give a new impetus” to India-Maldives relations. New Foreign Minister of the Maldives, Abdulla Khaleel, also commented on the positive developments expected, although specifics regarding discussions remain undisclosed. This visit marks a significant shift in the trajectory of Maldives-India relations, which had cooled due to tensions stemming from President Muizzu’s “India Out” campaign during his election. After a series of unfavorable remarks from Maldivian officials and an informal boycott by Indian tour operators adversely affecting tourism, relations experienced deterioration. However, following bilateral ministerial meetings and the completion of the withdrawal of Indian military personnel from the Maldives, ties have begun to thaw, prompting President Muizzu’s trip to New Delhi after visiting Turkey, the UAE, and China earlier this year. President Muizzu’s delayed visit due to economic challenges came after a cabinet reshuffle, which saw the appointment of Moosa Zameer, who had previously visited Delhi in May, as the new Finance Minister. The delegation accompanying President Muizzu plans to visit Agra and Mumbai on subsequent days, followed by Bengaluru.

The economic situation in the Maldives has become increasingly precarious, with a rising external debt burden and a growing need for financial assistance. Following President Muizzu’s ‘India Out’ campaign that signaled a cooling of relations with India, discussions and negotiations with India are critical for Maldives’ financial stability. The Maldivian government is seeking to secure support for urgent debt repayments as the country grapples with an overall debt exceeding $1.5 billion, while maintaining crucial diplomatic ties with India, a key development partner.

President Muizzu’s visit to India signifies a key moment for both the Maldives and India, as it seeks to strengthen bilateral ties while addressing the urgent financial challenges facing the Maldives. With discussions centered around financial assistance and support structures, the outcomes of this visit could determine the future stability of the Maldivian economy and its diplomatic relationship with India.

Original Source: www.thehindu.com