Maldives President Muizzu to meet Modi, request India support over looming debt crisis

Ahead of visit, Muizzu outlooks “fiscal situation”, expected to request debt waiver, currency swap arrangement

Maldives President Mohamed Muizzu landed in Delhi on Sunday (October 6, 2024), for a four-day State Visit to India, and is expected meet Prime Minister Narendra Modi on Monday (October 7, 2024) morning with a looming economic crisis and an imminent debt repayment on his hands back home. In an interview to an international broadcaster ahead of his visit Mr. Muizzu said he hoped that India would be ready to “ease the Maldives’ burden”, and he is expected to request a currency swap arrangement and debt support during bilateral talks at Hyderabad House, after he receives a guard of honour at Rashtrapati Bhawan. 

“India is fully cognizant of our fiscal situation, and as one of our biggest development partners, will always be ready to ease our burden, find better alternatives and solutions to the challenges we face,” Mr. Muizzu had told the BBC in a written interview.

In September, India announced that the State Bank of India would subscribe Maldivian government bonds of $50 million, staving off the country’s most imminent crisis, and Mr. Muizzu is expected to request Indian support in terms of currency swaps and debt waivers. He had earlier announced that China, a significant creditor, has agreed to defer loan repayments for five years. On October 8, Maldives is due to make a $25 million payment towards its $500 million “Sukuk” (Islamic bonds) debt repayment, out of a total $114 million still due this year, and about $1.5 Billion in the next two years. In view of the rising external debt, high debt to GDP ratio (approximately 110%) and falling Foreign Exchange reserves (at about $440 million), Credit Rating Agencies Moody’s and Fitch have both downgraded the Maldives in recent weeks, and any default on payments is likely to spiral the Maldives into a major crisis akin to the one faced by Sri Lanka in 2022. 

On Sunday (October 6, 2024), External Affairs Minister S. Jaishankar, Foreign Secretary Vikram Misri and other officials called on Mr. Muizzu to prepare for the talks, which are expected to end with announcements of MoUs on Indian infrastructure projects, security cooperation and bilateral cooperation in other fields. 

In a social media post, Mr. Jaishankar said Mr. Muizzu’s talks with PM Modi would “give a new impetus” to India-Maldives ties. “I am confident that this visit will pave the way to further elevating the close neighbourly relations between our two countries and strengthen the enduring friendship and cooperation between our two peoples,” Maldives’ newly appointed Foreign Minister Abdulla Khaleel also said in a post describing the meeting, without offering any specifics on the discussions.

The visit by Mr. Muizzu to Delhi, his second since he attended Mr. Modi’s swearing-in ceremony, marks a full turnaround in ties between the two countries from the tensions between them over the past year. Mr. Muizzu won elections in the Maldives last year on the back of an “India Out” campaign, and insisted that India withdraw military personnel from the archipelago by May this year. Unlike leaders of other friendly countries in the neighbourhood, Mr. Muizzu did not make India his first destination abroad, and visiting Turkey, UAE and China instead over the past year. Tensions also rose over remarks by Maldivian ministers that were critical of PM Modi, and led to an informal “Boycott Maldives” campaign by certain tour operators, that has halved the number of Indian tourists travelling there.  However, after a number of bilateral ministerial meetings, and the Modi government completing the withdrawal of military personnel, ties have warmed up, and Mr. Muizzu recently sacked the Ministers involved. 

While Mr. Muizzu’s visit to India has been expected for some weeks, the economic situation in the Maldives, as well as a cabinet reshuffle after the resignation of the Finance Minister had delayed plans. Former Foreign Minister Moosa Zameer, who visited Delhi in May, has now been appointed the Finance Minister. President Muizzu and his delegation will travel to Agra and Mumbai on Tuesday and then to Bengaluru on Wednesday.

Published - October 06, 2024 06:34 pm IST