India will provide over ₹6,300 crore to the Maldives amid a foreign exchange crisis, aiming to strengthen bilateral ties and launch a trade agreement.
New Delhi India on Monday agreed to provide financial support of more than ₹6,300 crore to the Maldives to tide over a foreign exchange crisis as the two sides discussed a potential trade deal, with Maldivian President Mohamed Muizzu holding talks with Prime Minister Narendra Modi for a reset of bilateral relations.
The two sides unveiled a new vision document for a comprehensive economic and maritime security partnership, including significant steps to bolster the maritime surveillance capabilities of the Maldives through the supply of Indian radar systems and other equipment, and to ramp up cooperation in trade, digitalisation and finance.
Addressing a joint media interaction with Muizzu following their talks, Modi noted that India is the “closest neighbour and a steadfast friend” of the Maldives, and will continue to extend assistance in areas ranging from development cooperation to defence and infrastructure development.
“This year, the SBI (State Bank of India) has rolled over treasury bills worth $100 million for the Maldives. Today, according to the need of the Maldives, a currency swap agreement of $400 million and ₹3,000 crore ( ₹30 billion) has been concluded,” Modi said, speaking in Hindi.
“To strengthen our economic ties, we have decided to initiate discussions on a free trade agreement. We will also work on trade settlements in local currencies…We will continue to provide all possible support for the progress and prosperity of the people of the Maldives,” he added.
Muizzu, who came to power on the back of an “India Out” election campaign last year and took several steps to move his country closer to Beijing and to reduce its dependence on New Delhi, acknowledged India as a key partner for socioeconomic and infrastructure development that “has stood by the Maldives during our times of need”.
He added, “The Maldives will remain a true friend, committed to our shared vision of peace and development in our countries and our region.”
The currency swap arrangement, Muizzu said, will be “instrumental in addressing the foreign exchange issues we are facing right now”. There was also a shared commitment to “remain engaged on further measures that will bolster the Maldives’ economic resilience and stability”, he said without giving details.
Foreign secretary Vikram Misri told a media briefing that the Maldivian side made “a number of other points and requests” regarding financial assistance that will be examined by New Delhi.
The outcomes from the bilateral meeting marked a significant turnaround from a particularly acrimonious phase in the relationship between New Delhi and Male. Ties fell to an all-time low after Muizzu demanded India withdraw more than 80 Indian military personnel deployed in the archipelago to operate three aircraft and then took steps to bolster defence and military cooperation with Turkey and China.
However, there were signs of a thaw when Muizzu was among seven regional leaders invited to Modi’s swearing-in in June. By then, India had replaced the military personnel with civilian experts and work had also continued on several India-funded development projects. Back-to-back visits by the foreign ministers of the two sides also helped smooth over irritants, and two Maldivian deputy ministers, who created a controversy with online posts seen as derogatory to Modi, resigned last month.
The currency swap arrangement has two elements – the Maldives Monetary Authority (MMA) is eligible for financing support from the Reserve Bank of India (RBI) worth $400 million under the dollar/euro swap window, and ₹30 billion under the INR swap window, the RBI said in a statement.
The agreement will be valid till June 2027 to provide a backstop line of funding for short-term foreign exchange liquidity requirements or short-term balance of payments stress till longer-term arrangements are made.
In May and September, SBI rolled over its subscription to Maldivian treasury bills worth a total of $100 million so that the country would not default on its Islamic bond payments.
Following their talks, Modi and Muizzu jointly launched India’s RuPay Card in the Maldives to boost tourism and economic cooperation and inaugurated the new runway of Hanimaadhoo international airport that was built with an Indian line of credit of $132 million. The Indian side also handed over 700 out of 4,000 housing units being developed with Indian aid to overcome a housing shortage.
The vision for comprehensive economic and maritime security partnership noted that the Maldives, with its vast exclusive economic zone, is exposed to maritime challenges such as piracy, illegal and unregulated fishing, drug trafficking and terrorism. The two sides agreed that India, as a “trusted and dependable partner”, will work with the Maldives in sharing expertise, augmenting capabilities and undertaking joint cooperative measures.
The Ekatha harbour project of the Maldives National Defence Force (MNDF), being implemented with India’s assistance, will contribute towards enhancing MNDF’s operational capabilities. India will provide the Maldives with defence platforms and assets, as well radar systems and other equipment, to enhance the MNDF’s surveillance and monitoring capabilities.
The Indian side also agreed to repair and refit, on gratis basis, a naval patrol vessel that was provided to the Maldivian Coast Guard some years ago.
India will support the Maldives on hydrographic matters, and both sides will strengthen cooperation in disaster response and risk mitigation. India will also help the Maldives in information sharing by supporting the development of infrastructure and training and sharing of best practices, while the Maldivian defence ministry building in Malé, constructed with Indian aid, will augment modern infrastructure capacity.
The two sides signed a memorandum of understanding (MoU) for cooperation between India’s Rashtriya Raksha University and the Maldives’ National College of Policing and Law Enforcement, and another for cooperation between India’s Central Bureau of Investigation (CBI) and the Maldives Anti-Corruption Commission to prevent and combat corruption. They also renewed two MoUs for training of Maldivian judicial officers and for cooperation in sports.
Modi noted during the media interaction that India has always acted as the “first-responder” for the Maldives. “Be it essential commodities for the people of the Maldives, providing drinking water during natural disasters, delivering vaccines during the Covid pandemic, India has consistently upheld its responsibilities as a neighbour,” he said.
