Deepshikha Maan, Jadetimes Staff
D. Maan is a Jadetimes news reporter covering Asia
India Extends Major Financial Aid to Maldives Amid Economic Crisis
India has pledged substantial financial assistance to the Maldives to help stabilize its struggling economy. The announcement came following talks between Maldives President Mohammed Muizzu and Indian Prime Minister Narendra Modi during Muizzu’s five day official visit to India.
Financial Support Package to Boost Economic Recovery
The financial aid package includes a $400 million currency swap agreement and an additional 30 billion rupees ($357 million) in another swap deal. This will allow businesses in both countries to trade in their local currencies, bypassing the need for U.S. dollars. The move is expected to ease pressure on the Maldives’ foreign exchange reserves and help businesses continue their operations amid ongoing economic difficulties.
Diplomatic Relations Enter a 'New Chapter
Prime Minister Modi emphasized the importance of the renewed ties, calling Muizzu’s visit a "new chapter" in the relationship between the two nations. He reiterated India’s commitment to supporting the progress and prosperity of the Maldivian people. The high profile reception given to President Muizzu marked a significant improvement in diplomatic relations, which had become strained after he assumed office in November 2023.
Shifting Alliances and Economic Realities
President Muizzu's initial foreign visits to Turkey and China, bypassing India, were seen as a diplomatic snub to Delhi, especially as previous Maldivian leaders had traditionally made their first state visit to India. Tensions escalated further when comments critical of Prime Minister Modi were made by Maldivian officials. However, the Maldivian government’s need for economic support has driven efforts to repair ties with India.
Maldives Faces Economic Crisis
The Maldives is on the brink of a debt crisis, with foreign exchange reserves falling to $440 million, enough to cover only one and a half months of imports. In light of this, the financial package from India is seen as crucial for addressing the Maldives' foreign exchange issues. President Muizzu expressed his gratitude, stating that the aid would be "instrumental in addressing foreign exchange issues."
Free Trade Agreement Talks Begin
In addition to financial support, India and the Maldives have agreed to initiate discussions on a potential free trade agreement. This could further strengthen economic ties between the two countries and provide a framework for future collaboration.
A Shift in Foreign Policy?
While President Muizzu had previously taken steps to reduce India’s influence and foster closer ties with China, his administration now seems focused on mending relations with Delhi. This was evident during the visit, with Muizzu stating that differences could be resolved through dialogue and mutual understanding. Despite his administration's previous decisions, such as allowing a Chinese research ship to dock in the Maldives earlier this year, Muizzu emphasized that his foreign policy is based on the principle of "Maldives First," rather than a pro China stance.
Balancing China’s Role in the Maldives
Although Muizzu has distanced himself from a pro-China label, the Maldives remains economically reliant on China, which has extended $1.37 billion in loans to the island nation. However, with India reaffirming its role as a key partner, the Maldives seems to be balancing its foreign relations between these two major powers while focusing on addressing its pressing economic challenges.
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