In sharp contrast to his unfriendly utterances about India since he came to power in November 2023, the Maldivian President Mohamed Muizzu last week sounded conciliatory when he told the local Dhivehi language media outlet “Mihaaru” that India is the Maldives’ “closest ally” and that it will remain a close ally.
Muizzu said that it was India which had taken up the “greatest number of projects” in the Maldives.
“I conveyed to Prime Minister Modi during our meeting that I did not intend to halt any ongoing projects. Instead, I expressed my desire to strengthen and expedite them” he said, referring to his discussion with Prime Minister Narendra Modi in Dubai on the sidelines of the COP28 summit in Dubai in December 2023.
“I suggested that a high-level committee be established, one designed for quick decision-making even in the bridge project to ensure speedy work. The same for the Hanimaadhoo Airport,” Muizzu added.
According to the Indian Ministry of External Affairs, in December 2018, India announced a financial assistance package of US$ 1.4billion to the Maldives which included US$ 50 million as budgetary support, subscription by the State Bank of India to Maldivian Treasury bills amounting to US$ 150 million, and a Currency Swap Agreement for US$ 400 million.
There were eight infrastructure Projects under the US$ 800 million Line of Credit (LoC) including the Gan International Airport Redevelopment project.
Debt Restructuring
Be that as it may, the main point in President Muizzu’s interview was that he wanted India to give the Maldives debt relief on the plea loans from India had cast a heavy burden on the island nation’s finances. According to his calculation, the outstanding debt to India was US$ 400.9 million in 2023.
He blamed previous governments, including the pro-India predecessor government of Ibrahim Solih, for the debt burden.
“The conditions we have inherited are such that there are very large loans taken from India. Hence, we are holding discussions to explore leniencies in the repayment structure of these loans,” Muizzu said.
But sources in the Maldives wonder if India would respond to Muizzu’s request debt restructuring favourably, and that too, any time soon. Many wonder if India would easily forget the anti-Indian steps Muizzu had taken since coming to power, while others said that India might not let go of an opportunity to make up with Muizzu if only to prevent China from filling the vacuum.
Irritants
Muizzu had gone out of the way to put India off from the word go. He wanted India to take back the 88 military personnel who were running a medical air evacuation service with an India-gifted Dornier aircraft and two choppers. He then said he would review all the agreements which his pro-Indian predecessor Ibrahim Solih had signed with India. He also announced that he was cancelling the agreement to do a hydrographic survey of the Maldives with India.
When the Indian Prime Minister Narendra Modi went to the Lakshadweep Island off Kerala coast and urged Indian tourists to patronize these idyllic islands, three Maldivian junior ministers tweeted insulting remarks about him. They saw Modi’s call to patronize the Lakshadweep islands as an attempt to downgrade the Maldives’ resort status. Incensed Indians did boycott the Maldives but the Chinese filled the gap by sending tourists, responding to Muizzu’s call for help.
On assuming power, Muizzu skipped the customary visit to India and chose to visit Turkiye and China instead. He ordered drones from Turkiye and signed a strategic partnership agreement with China including one to develop the Maldivian blue economy. He also allowed a Chinese research vessel, which India considers a spy vessel, to dock in the Maldives against India’s wishes.
In an apparent reply to Muizzu’s anti-Indian actions, the Indian Coast Guard reportedly boarded Maldivian fishing vessels on two occasions and interrogated the crew. India also announced plans to expand its Naval base INS Jatayu in Minicoy, 70 nautical miles from the Maldives.
An angry Muizzu said that the Maldives might be a small country, but it would not allow any other country to “bully” it. He also said that his government would survey the seas around the Maldives 24/7 on its own.
However, eventually, India agreed to replace all Indian military personnel by Indian civilians in the airmobile evacuation service by May 10. Further, in its budget for 2024-25, India allocated INR 600 crores (US$ 71 million) for the Maldives. Only Nepal and Bhutan got a bigger allocation.
China Factor
But while these Indian steps and Muizzu’s statements in the press interview indicate a thawing in bilateral relations, India may like to know what China is planning to do about Muizzu’s request for a restructuring of the repayment schedule for loans taken from China.
The World Bank, quoting the Maldivian Finance Ministry, said that the Maldives’ debt to China was 42% of its total outstanding foreign debt of US$3 billion in 2021. A Chinese technical team is expected to visit the Maldives to assess the financial situation.
IMF Positive
The IMF is sanguine about the economic prospects of the Maldives. The most recent IMF report says that the Maldives’ GDP growth rate could be 5.2% in 2024, as tourist arrivals are expected to rise further.
Nevertheless, fiscal and external vulnerabilities have increased, calling for urgent policy adjustments.
“A sustained fiscal consolidation, accompanied by tighter monetary and macro-prudential policies, is needed to reduce vulnerabilities and restore the sustainability of public finance and debt. The authorities are taking a welcome step to develop an ambitious and home-grown fiscal reform agenda and committed to urgently implement this,” the IMF report said.
With the economy promising to look up, the Maldives would be a good country to partner with. Furthermore, India has to compete with China for space in this strategically located archipelago in the Western Indian Ocean which has become an important arena of contestation between India, China and the Western powers.
Electoral Dimension
The Maldivian Parliamentary Elections to be held on April 21, are also of relevance to Indo-Maldivian relations.
Sources in the Maldives say that Muizzu’s party the Peoples’ National Congress (PNC) is at odds with its ally, the Progressive Party of Maldives (PPM). The two had fought the Presidential Election together but have now split virtually. The split is actually between two leaders, Muizzu and former President Abdulla Yameen. While Yameen expects Muizzu to listen to him (being the senior)Muizzu wants to be independent.
The Maldivian Democratic Party (MDP), the party of former Presidents Mohamed Nasheed and Ibrahim Solih, broke before the Presidential Election into the MDP proper, and the Democrats, with Nasheed leading the Democrats.
However, at present Nasheed is not active in Maldivian politics having got involved with climate change at the international level.
Therefore, at present, no party is expected to get a majority in parliament. In that case, President Muizzu will not be able to make parliament toe his line whether in domestic or foreign affairs.
Parliament will be divided into pro-India and pro-China groups. The PPM and PNC will be pro-China, while the MDP and the Democrats will be pro-India. Thus, both India and China will have lobbies working for them in parliament.
It is often said that the Maldives has swung to the Chinese side. But Maldives watchers say that at the grassroots level, there is no widespread antagonism towards India despite the PPM-PNC’s “India Out” movement. The only grievance that many Maldivians have with India is the slow pace of implementation of its projects as compared to the Chinese. It is significant that President Muizzu had sought the “speedy” execution of Indian projects.
