Indian financial aid opens 'new chapter' with Maldives

India has agreed to extend hundreds of millions of dollars in financial support to the Maldives to help strengthen its struggling economy.

This announcement came after Maldives President Mohammed Muizzu met with Indian Prime Minister Narendra Modi during his five-day visit to India. The financial aid package includes a 400 million US dollar currency swap deal and an additional 30 billion rupees ($357 million; £273 million) in another swap agreement. These agreements will enable businesses to trade in their local currencies instead of relying on US dollars.
President Muizzu received a warm welcome, signaling a shift in relations that had cooled in recent months. Modi described the visit as the beginning of a 'new chapter' in bilateral ties, reaffirming India's commitment to the Maldives. 'India will always support the progress and prosperity of the people of the Maldives,' Modi stated.
This renewed cooperation is seen as a positive step after tensions arose following Muizzu's election in November 2023. His initial foreign visits to Turkey and China, especially his January trip to China, were viewed as distancing the Maldives from India, as past Maldivian leaders traditionally prioritized India for their first official visits.
The Maldives is currently facing the threat of a debt default, with its foreign exchange reserves dwindling to $440 million (£334 million), barely enough to cover 1.5 months of imports.
During his visit, Muizzu said he had "extensive discussions" with Modi to forge a path for future collaboration. He also emphasized that his policies are centered on a “Maldives First” approach, distancing himself from being labeled pro-China. Muizzu expressed gratitude to India, acknowledging that the financial support would play a crucial role in resolving the country's foreign exchange challenges.
The two nations also agreed to begin negotiations on a free trade agreement.