Maldives President Mohamed Muizzu is set to embark on his first bilateral visit to India on Sunday, October 6. His state visit, scheduled from October 6 to 10, comes at a crucial juncture for the island nation, grappling with a tourism crisis and mounting debt. This visit, however, holds more than just diplomatic significance; it is a strategic move by President Muizzu to mend strained ties with India and seek a much-needed financial lifeline.
Muizzu’s visit comes amidst a decline in Indian tourist arrivals to the Maldives. The tourism industry, a mainstay of the Maldivian economy, has been impacted significantly by the strained relations between the two nations, which escalated after some Maldivian officials criticized Prime Minister Narendra Modi’s visit to Lakshadweep in January 2024. The officials perceived Modi’s promotion of Lakshadweep as a potential competitor to the Maldives, leading to a drop in Indian tourists and pushing India from the top spot to the sixth position in the Maldives Tourism Markets chart.
Between January and August 2024, the number of Indian tourists to the Maldives declined by about 40%, marking a loss of around $150 million for the island nation. This decline highlights the precarious state of the Maldivian economy, burdened by an $8 billion debt, including $1.4 billion owed each to China and India.
Ahead of President Muizzu’s visit, reports suggest that a bailout package from India is a primary agenda item. While the Maldives has not officially confirmed this, a senior Maldivian editor told the BBC that securing a financial lifeline, including grant-in-aid and debt restructuring, is a top priority for President Muizzu. The Maldivian government is also reportedly seeking a $400 million currency swap deal to bolster its dwindling foreign exchange reserves.
The Maldives’ economic woes are evident in its declining foreign exchange reserves, which plummeted by roughly 20% to $395 million in July 2024 from $492 million in May 2024. This marks the lowest level since December 2016. Furthermore, the Maldivian government faces significant debt servicing obligations, with $50 million due in the fourth quarter of 2024 and $64 million in publicly guaranteed external debt. The total external debt servicing is expected to rise to $557 million in 2025 and exceed $1 billion in 2026, including repayment of a $500 million sukuk.
Beyond the economic concerns, President Muizzu’s visit aims to mend the diplomatic ties with India, which were strained by his government’s previous anti-Indian rhetoric. After a “India Out” election campaign last year, President Muizzu was seen as pro-China, which further aggravated the situation. He also faced criticism for requesting India to withdraw its troops from the country. However, since coming to power, President Muizzu has toned down his anti-Indian rhetoric and emphasized his commitment to a balanced regional relationship.
During his visit, President Muizzu is scheduled to meet with President Droupadi Murmu and hold discussions with Prime Minister Narendra Modi on bilateral, regional, and international issues. He will also attend business events in Mumbai and Bengaluru. The visit comes after a previous meeting between President Muizzu and Prime Minister Modi at the COP28 summit in Dubai in December 2023 and the swearing-in ceremony of PM Modi in June 2024.
As the Maldives navigates its economic and political challenges, the outcome of President Muizzu’s visit to India will be closely watched, particularly in terms of the financial package and the restoration of diplomatic ties. The visit holds the potential to reshape the relationship between the two nations, with implications for the Indian Ocean region.
