President Mohamed Muizzu of the Maldives is visiting India to seek economic support amid his country’s looming debt crisis. He is expected to meet Prime Minister Narendra Modi to discuss arrangements for currency swaps and debt relief as the Maldives faces critical payments on its substantial debt obligations. Recent economic strains have resulted in downgrades from credit agencies, and this visit may help mend previously tense relations between the two nations.
On October 6, 2024, Maldives President Mohamed Muizzu arrived in Delhi for a four-day State Visit to India, during which he is anticipated to meet with Prime Minister Narendra Modi. This visit comes at a critical time, as President Muizzu faces an impending economic crisis and significant debt repayments. During a recent interview, the President conveyed his hope that India would assist in alleviating the Maldives’ financial burdens, specifically seeking a currency swap arrangement and debt relief during talks at Hyderabad House, following a ceremonial guard of honour at Rashtrapati Bhawan. President Muizzu remarked, “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,” reflecting the Maldives’ reliance on India for economic support. Last month, India pledged its support through the State Bank of India, which agreed to purchase $50 million in Maldivian government bonds, temporarily alleviating the country’s immediate fiscal distress. The Maldives is due to make a $25 million payment towards its $500 million in Sukuk (Islamic bonds), with an overall debt obligation of approximately $114 million due within the calendar year and around $1.5 billion owed over the next two years. Given the escalating external debt, a high debt-to-GDP ratio nearing 110%, and dwindling foreign exchange reserves estimated at $440 million, credit rating agencies Moody’s and Fitch have both recently downgraded the Maldives’ ratings, indicating that any failure to meet debt obligations could lead to a crisis similar to that experienced by Sri Lanka in 2022. On the eve of their discussions, External Affairs Minister S. Jaishankar and other high-ranking officials engaged with President Muizzu to prepare for the anticipated talks, which are expected to culminate in announcements regarding memoranda of understanding (MoUs) related to Indian infrastructure projects, security collaboration, and other fields of bilateral cooperation. Minister Jaishankar noted that the engagement with President Muizzu would impetus India-Maldives relations, asserting confidence that the visit would fortify the ties between the nations. Furthermore, Maldives’ Foreign Minister Abdulla Khaleel echoed this sentiment, stating that the engagement would enhance the enduring friendship between the two peoples. Historically, President Muizzu’s visit signifies a substantial improvement in relations, particularly considering the tensions that arose in the previous year, marked by his electoral campaign against Indian military presence and subsequent calls for withdrawal. Despite these earlier strains, both nations have engaged in multiple ministerial interactions leading to a thaw in relations, culminating in the recent reappointment of ministers previously critical of India. President Muizzu’s itinerary includes visits to Agra and Mumbai, followed by Bengaluru, showcasing the multifaceted nature of Maldives’ diplomatic approach and the importance placed on fostering stronger ties with India.
The Maldives has faced escalating economic challenges, primarily arising from a significant debt burden and declining foreign exchange reserves. The previous administration’s reliance on Chinese loans contributed to the financial situation, leading to high debt-to-GDP ratios and subsequent credit downgrades from major agencies. The election of President Muizzu, who campaigned on reducing Indian influence in the Maldives, initially strained relationships; however, recent diplomatic engagements have indicated a pivot towards reconciliation between the two nations, particularly amid mounting economic pressures necessitating support from India.
In conclusion, President Muizzu’s visit to India represents more than just a diplomatic engagement; it is a critical attempt to secure economic support essential for the Maldives amidst a looming debt crisis. The discussions expected to unfold during his meetings with Prime Minister Modi could significantly impact future bilateral relations, fostering economic stability in the Maldives. The visit underscores the importance of regional cooperation in addressing shared challenges, with India poised to play a pivotal role in stabilizing the Maldivian economy.
Original Source: www.thehindu.com
