October 7, 2024
India has already committed to subscribing to US$50 million of Maldivian government bonds to stave off immediate crisis, but further requests for aid are expected during bilateral talks
The Maldives faces a US$25 million Sukuk debt repayment by October 8, with US$1.5 billion due over the next two years, as external debt reaches 110% of GDP
Credit rating agencies Moody's and Fitch have downgraded the Maldives due to rising debt and falling foreign exchange reserves, heightening concerns of a Sri Lanka-style crisis
The visit will conclude with MoUs on Indian infrastructure projects, security cooperation, other areas, and visits to Agra, Mumbai, and Bengaluru
Maldives President Mohamed Muizzu arrived in Delhi on Sunday for a four-day state visit aimed at addressing his country’s economic crisis. With significant debt repayments looming and foreign exchange reserves dwindling, Muizzu is expected to seek India’s support through a currency swap arrangement and debt relief during his meeting with Prime Minister Narendra Modi. The talks, scheduled for Monday, come at a critical time for the Maldives, which faces an imminent payment of US$25 million towards its Sukuk (Islamic bonds) debt on October 8, part of a larger US$1.5 billion debt due over the next two years.to address
India has already stepped in to assist, with the State Bank of India subscribing to US$50 million worth of Maldivian government bonds in September to ease immediate pressures. However, during his discussions at Hyderabad House, Muizzu is expected to request further economic assistance, including debt waivers. Ahead of the talks, External Affairs Minister S. Jaishankar and other officials met with Muizzu to prepare for a pivotal moment in India-Maldives relations.
The Maldivian economy, heavily reliant on tourism, is grappling with external debt reaching 110% of GDP and foreign exchange reserves dwindling to around US$440 million. Credit rating agencies Moody’s and Fitch have recently downgraded the country’s credit status, citing concerns over its rising debt and the risk of default. Any failure to meet debt obligations could plunge the Maldives into a financial crisis similar to the one faced by Sri Lanka in 2022.
Muizzu’s visit also represents a turning point in diplomatic relations between India and the Maldives, strained following his “India Out” campaign last year. After winning elections on a platform calling for the withdrawal of Indian military personnel from the Maldives, Muizzu initially visited Turkey, the UAE, and China instead of India. Tensions worsened with remarks from Maldivian ministers critical of Prime Minister Modi, leading to an informal boycott of the Maldives by some Indian tour operators, which halved the number of Indian tourists visiting the island nation.
Recent bilateral ministerial meetings and the Modi government’s completion of the military withdrawal have improved ties despite these earlier strains. Muizzu has since removed the ministers responsible for the critical remarks, and both sides are now looking to strengthen cooperation in infrastructure, security, and other areas.
After his meetings in Delhi, President Muizzu and his delegation will visit Agra, Mumbai, and Bengaluru, marking an important step in restoring bilateral relations while addressing the Maldives’ pressing financial challenges.
Source: The Hindu