Maldives Crisis: India is reportedly preparing to provide financial aid to Maldives and President Mohamed Muizzu may visit India soon, the Maldives government announced. Maldives is on the verge of defaulting due to economic crisis and external debt.
Although the Maldives government has not yet formally requested assistance from India, it is likely to be discussed during President Mohammed Muizzu’s upcoming visit to India. According to a Bloomberg report, the Maldives may get $400 million immediately under the Reserve Bank of India’s (RBI) currency swap program, while additional long-term loans may be sought under the $800 million loan limit extended in 2019.
Maldives is pleading for help from India
Bloomberg reported that Maldives has to pay $25 million in October, which is part of its $500 million sukuk loan. The Maldives Monetary Authority has confirmed that it is in talks with India for a $400 million currency swap, but India’s foreign ministry and other relevant bodies have not commented on the matter.
The Maldives’ economic challenges have worsened in recent years. According to the Observer Research Foundation, the country’s debt is set to rise to 110% of its gross domestic product by March 2024, while foreign exchange reserves have plummeted. With significant external debt repayments due in 2025 and 2026, rating agency Moody’s recently downgraded the country’s credit rating even further to junk status, citing an increased risk of default.
Maldives is facing many challenges
India is prepared to support the Maldives, despite Muizzu’s election being anti-India and his pledge to strengthen ties with China. The rivalry between India and China for regional influence continues, as seen in China’s recent agreement with the Maldives to increase the use of local currencies.
Meanwhile, the Maldives is struggling with its tourism-dependent economy, which suffered due to a boycott of Indian tourists following diplomatic tensions last year.