Maldivian President Mohamed Muizzu is expected to seek financial aid during his visit to India this week, as the island nation grapples with an impending economic crisis and worries about a potential debt default. This will be Muizzu’s first official bilateral visit since his election late last year, which was marked by a campaign that emphasized an ‘India out’ policy aimed at reducing New Delhi’s influence in the region. Despite the resulting strain in relations between the two countries, analysts believe this visit highlights the Maldives’ reliance on its significant neighbor. As of September, the Maldives’ foreign exchange reserves stood at around $440 million, enough to cover only about one and a half months of imports. Additionally, last month, the global credit rating agency Moody’s downgraded the Maldives’ credit rating, signaling a heightened risk of default. An Indian bailout would bolster the country’s foreign currency reserves.
President Muizzu’s visit signifies a notable shift, highlighting the Maldives’ heavy reliance on India, which is unlikely to be easily replaced. The Maldives, with a population of around 520,000, depends on India for essential needs like food, infrastructure, and healthcare. While there’s no official confirmation of a financial package during this visit, experts believe discussions may occur. Muizzu aims to secure financial assistance and restructure debt repayments amid an economic crisis and potential debt default. This visit, his first official engagement since his election on an ‘India out’ platform, underscores the Maldives’ need to engage with its significant neighbor, especially given its precarious foreign exchange reserves of about $440 million, enough for only 1.5 months of imports.
India has historically influenced the Maldives due to its strategic location in the Indian Ocean. However, President Muizzu aimed to shift this by strengthening ties with China. In January, his administration demanded the withdrawal of around 80 Indian military personnel, who were operating donated rescue helicopters and a Dornier aircraft. An agreement was reached to replace them with Indian civilian technical staff. Muizzu’s government also chose not to renew a hydrographic survey agreement with India. Tensions rose when three deputy ministers made derogatory remarks about Indian Prime Minister Modi, prompting backlash and calls for a boycott of the Maldives on Indian social media. The Maldivian government clarified that these comments were personal and suspended the ministers. Muizzu later stated, “We may be small, but that doesn’t give you the licence to bully us.”Muizzu has come to understand that provoking India is not a viable strategy, and his pragmatic approach is grounded in sound reasoning. Over the past year, the influx of Indian tourists to the Maldives has decreased by 50,000, leading to an estimated financial shortfall of approximately $150 million. He recognizes that without financial backing from India, the Maldives risks descending into a state of decline. Consequently, his upcoming visit to India holds significant importance.
