Maldives President Muizzu to Seek India’s Support Amid Economic Crisis

Maldives President Mohamed Muizzu is on a four-day State Visit to India, beginning October 6, 2024, seeking economic support amid a crisis. He plans to discuss debt relief and currency swaps with Prime Minister Modi during bilateral talks. The Maldives faces significant economic challenges, including high debt and low foreign reserves, prompting concerns about potential defaults. Improved ties between the two nations are anticipated as President Muizzu aims to navigate these challenges.

Maldives President Mohamed Muizzu has arrived in New Delhi for a four-day State Visit, aiming to engage in critical discussions with Prime Minister Narendra Modi amid a pressing economic crisis in the Maldives. His visit, commencing on October 6, 2024, includes vital talks expected to address the nation’s imminent debt repayments and seek assistance from India. During an interview prior to his arrival, President Muizzu indicated his hopes for India’s support to “ease the Maldives’ burden,” emphasizing the necessity for a currency swap arrangement and debt support during bilateral discussions scheduled at Hyderabad House following his reception at Rashtrapati Bhawan. Notably, 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 a written interview with the BBC. He anticipates discussions on these topics, particularly after India took steps in September to mitigate immediate threats by committing $50 million to subscribe to Maldivian government bonds. Additionally, President Muizzu has reportedly secured a five-year deferment on loan repayments from China, one of Maldives’ significant creditors. The nation is poised to make a $25 million payment toward its Islamic bonds, with a total of $114 million owed this year and an upcoming $1.5 billion due over the following two years. The situation is compounded by rising external debt, a high debt-to-GDP ratio nearing 110%, and dwindling foreign exchange reserves amounting to approximately $440 million. Recent downgrades by credit rating agencies Moody’s and Fitch signal warning signs regarding the sustainability of Maldives’ economic health, with potential defaults likened to Sri Lanka’s financial turmoil in 2022. In anticipation of the talks, top officials, including External Affairs Minister S. Jaishankar, met with President Muizzu to finalize the agenda. The discussions are likely to yield Memoranda of Understanding (MoUs) on Indian investments in infrastructure, security cooperation, and enhanced bilateral relations. Prospects for rejuvenating India-Maldives ties appear promising, with Mr. Jaishankar commenting that these discussions will “give a new impetus” to the relationship between the two nations. This visit signifies a noteworthy shift in diplomatic ties, especially considering the previous year’s tensions rooted in President Muizzu’s election campaign, which included an “India Out” movement. The Maldives’ political landscape experienced strain due to critical statements from Maldivian ministers regarding Prime Minister Modi, resulting in a deference from Indian tourism to the Maldives. However, following bilateral meetings and India’s compliance with military personnel withdrawals, the atmosphere has improved, leading to the dismissal of certain critical ministers by President Muizzu. Despite some delays in finalizing the visit owing to the Maldives’ economic circumstances and a recent cabinet reshuffle, President Muizzu’s delegation is set to extend their itinerary to Agra, Mumbai, and Bengaluru during their stay.

The Maldives, an island nation dependent on tourism and external support, is currently facing an acute economic crisis characterized by high levels of debt and diminishing foreign currency reserves. With its debt-to-GDP ratio hovering around 110% and a looming repayment of approximately $1.5 billion due over the next two years, the country is under severe financial strain. The recent downgrading of its credit rating has raised alarms about a potential economic collapse similar to that of Sri Lanka. In this context, the new administration under President Muizzu is turning to India, a key development partner, for assistance.

In conclusion, President Mohamed Muizzu’s visit to India underscores the critical juncture at which the Maldives stands regarding its economic instability. His discussions with Prime Minister Modi are anticipated to foster bilateral support, particularly concerning debt relief and economic collaboration. The historical context of fraught diplomatic relations presents both challenges and opportunities for rejuvenating cooperation between the two nations. As Maldives seeks to navigate its fiscal burdens, the outcomes of these talks could significantly influence its financial recovery trajectory.

Original Source: www.thehindu.com