India extends aid to neighbor amid efforts to reset ties

Indian Prime Minister Narendra Modi and Maldivian President Mohamed Muizzu held talks in New Delhi on Monday in a bid to foster stronger strategic and economic cooperation after a deep diplomatic row. 

“India is Maldives’ nearest neighbour and close friend,” Modi stated on Monday following the talks. He added that his country had always played the role of “first responder” for its island neighbor.   

Both leaders expressed a commitment to enhancing their relationship and signed a host of bilateral documents, including an outline for an economic and maritime security partnership. India also announced a set of infrastructure and other economic initiatives in the Maldives.   

New Delhi also announced critical financial assistance to help the Maldives overcome its foreign exchange reserve deficit. India has approved a $400 million and 30 billion rupee ($357 million) currency swap agreement and granted the nation a rollover of $100 million in Treasury bills, New Delhi said in a statement.

Addressing the media alongside the Indian leader, Muizzu thanked Modi for the financial support and acknowledged that India, whom he named a “key partner,” has always stood by his nation in times of need.   

Muizzu is on his first state visit to India since assuming office last November on the back of his ‘India Out’ campaign. Months after becoming president, he ordered the eviction of Indian troops from the island nation, stirring a diplomatic row. He then went to Beijing for his first state visit and secured funding for infrastructure development projects.  

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New Delhi has viewed Muizzu as a pro-China leader and repeatedly flagged concerns over the Maldives assisting China’s “research” activities in the Indian Ocean.  

Muizzu’s ongoing visit to New Delhi is thus seen as an attempt to repair damaged ties with India and also secure financial aid in the wake of a looming debt crisis. Maldives’ foreign exchange reserves have plummeted to $440 million, prompting credit rating downgrades by Moody’s and Fitch due to rising debt concerns. Notably the island nation owes about $1.3 billion, or nearly 20% of its total debt, to China – compared with less than a tenth of that for India. 

The Maldivian leader has over the year toned down his anti-India rhetoric. On Sunday, he told the Times of India newspaper that his nation values India as an important partner and will continue to pursue strong and strategic ties with New Delhi, while noting that its ties with other nations will not hurt India’s security interests. While justifying the expulsion of Indian troops by saying that he was following the “will” of his people, Muizzu said that defense cooperation with India will “always be a priority.” 

Muizzu also invited Modi to visit the island nation and made a pitch for expanding tourism, emphasizing that Indian tourists contribute significantly to the nation’s economy. His remarks came in the wake of Indian tour operators boycotting the luxury destination earlier this year after officials in Muizzu’s government made insulting remarks about Modi on social media.