The Union government on Monday extended $400 million “support” and a bilateral currency swap of Rs 3,000 crore to the Maldives.
The move aims to help the island nation boost its dwindling foreign exchange reserves.
This came after Maldives President Mohamed Muizzu, who is on a four-day visit to India, met Prime Minister Narendra Modi at the Hyderabad House in Delhi on Monday.
Between May and September, the State Bank of India renewed its subscription to $100 million worth of government treasury bills issued by the Maldives for another year at the Maldivian government’s request.
“This year, SBI did a rollover of 100 million dollars of the Treasury Bench of Maldives,” Modi said on Monday. “As per the needs of Maldives, a 400 million dollars and Rs 30 billion currency swap agreement was also signed.”
Maldives, which is heavily reliant on tourism, is burdened with an external debt estimated to be 110% of its gross domestic product while its foreign exchange reserves have dipped to $440 million.
This is not enough to cover more than six weeks of imports by the island nation and sparked fears that Malé could default on a $25 million payment on its $500 million outstanding sukuk debt in October.
Sukuk are Sharia-compliant financial bonds that are meant to serve as an alternative to conventional bonds, which are not considered permissible by Islamic law. The Maldives issued a $500 million sukuk in April 2021 that will mature in 2026.
Modi said on Monday that India has been a “first responder” every time the Maldives has faced a crisis, particularly during the Covid-19 pandemic. He also announced the initiation of negotiations for a Free Trade Agreement between the two countries.
New Delhi and Malé also signed pacts on judicial training, corruption prevention, law enforcement training and the development of sports infrastructure.
After their talks, the two leaders launched the National Payments Corporation of India’s RuPay card in the Maldives. They also remotely inaugurated 700 social housing units and a new runway at the Maldives’ Hanimaadhoo International Airport.
“I would like to thank Prime Minister Modi, the government and the people of India for generous assistance and cooperation extended to the Maldives over the years, including the recent budgetary support in the form of rollover of the Treasury bills,” Muizzu said in New Delhi.
Muizzu also invited Prime Minister Modi to visit the Maldives next year to celebrate the 60th anniversary of diplomatic relations between New Delhi and Malé.
On Sunday, in an interview to The Times of India, Muizzu affirmed that his country’s “Maldives First” policy would not affect its long-standing relationship with India, especially regarding security interests.
“We are confident that our engagements with other nations will not undermine India’s security interests,” Muizzu said, describing New Delhi as a “valued partner and friend” with a relationship “built on mutual respect and shared interests”.
Muizzu also defended his government’s decision to remove Indian troops from the Maldives, saying he was merely abiding by the demand of many Maldivians.
“What I did is what the people of the Maldives asked from me,” he told The Times of India. “The recent changes reflect our efforts to address domestic priorities. Our review of past agreements is aimed at ensuring they align with our national interests and contribute positively to regional stability.”
Muizzu, who is widely seen as being pro-China, had led an “India Out” campaign during the tenure of former Maldivian President Ibrahim Solih. He protested Solih’s policies that were perceived to be friendly towards New Delhi.
Removing India’s military presence from the Maldives was a key poll plank for Muizzu, who was elected president on November 17.
India was the only foreign power with a military presence in the Maldives. A group of Indian defence personnel had maintained radar stations and surveillance aircraft in the archipelago. Indian warships also helped patrol the Maldives’ exclusive economic zone.
On May 10, Maldives said that India had withdrawn all its military personnel from the country.
On September 27, Muizzu denied having espoused an “India Out” policy and claimed that he only advocated for the removal of foreign military personnel in keeping with the wishes of his citizens.
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