A file photo of the flag of Republic of Maldives.

Despite global lenders and rating agencies flagging a “high risk” of debt distress in the Maldives, the government said it is well prepared to stave off a financial meltdown.

Addressing Colombo-based journalists on Friday evening (September 13, 2024), Minister of Foreign Affairs Moosa Zameer and Minister of Finance Mohamed Shafeeq ruled out a possible default and pointed to “crucial steps” taken by the government towards fiscal consolidation and reform.

India, Maldives hold defence dialogue focusing on Indian Ocean

The top officials’ assurance comes days after rating agency Moody’s downgraded the island country’s credit rating and warned of a full-blown debt crisis and possible default, amid looming deadlines for foreign debt servicing.

President Mohamed Muizzu assumed office in November 2023 after a big election win — he has a comfortable majority in Parliament or People’s Majlis as well — but currently faces a daunting challenge as the Indian Ocean archipelago grapples with high external debt. “The Muizzu administration is taking advice from the International Monetary Fund, but there is no immediate plan to sign up for its programme,” the Ministers said, expressing confidence that its bilateral partners would step in.

China is the Maldives’s largest creditor and India is another key lender. The two countries are financing a host of infrastructure projects that the government hopes will aid better connectivity and economic development. “Both India and China are very sensitive to our challenge and are willing to help,” Mr. Zameer said, pointing to “many options” on the table, including a possible debt freeze, currency swaps, and local currency settlements. “We will discuss these as and when there is a need.”

On Friday (September 13, 2024), the Maldives’s Ministry of Economic Development & Trade signed an agreement with the People’s Bank of China to establish a local currency settlement framework. Authorities are in talks with India for a similar arrangement.

“We are already taking all the necessary steps including reform of State-Owned Enterprises and our health sector. We are switching from blanket to targeted subsidies and rationalising our public expenditure,” Mr. Shafees said. Following the downgrade by Moody’s, the Finance Ministry said it was engaging with all its bilateral and multilateral partners to meet the financing requirements, and that a “strong performance” in the vital tourism sector was expected to boost growth.

Tourist arrivals have seen an uptick in 2024. Chinese arrivals lead the list, contributing 12% of visitors, while arrivals from India declined sharply from 11% of visitors to 6%, the World Bank said in its May 2024 update. The period coincides with strained bilateral ties between India and the Maldives, on the heels of the “India Out” campaign around Mr. Muizzu’s election last year, and amid controversial statements made by two junior ministers in his government that triggered a call to “boycott Maldives” within India.

Emphasising that relations have since seen a marked improvement, Mr. Zameer said Indian tourist arrivals are “picking up very well” and the neighbours are keen to strengthen ties. “We have had high-level engagement”, including External Affairs Minister Jaishankar’s visit to the Maldives in August, and the countries’ “very pragmatic” leaders have addressed the “initial mistrust”, he said. President Muizzu is expected to travel to New Delhi soon on his first bilateral visit, although he has Mr. Modi on the sidelines of other global meets and at Mr. Modi’s swearing in ceremony this year.

“I think India-Maldives ties now are as good as they were during President Maumoon Abdul Gayoom’s time, which is considered the best time in our relationship,” Mr. Zameer added.

Male:

Maldives President Mohamed Muizzu thanked India for its support of the island nation in easing its debt repayment and affirmed hope that New Delhi and Male would forge stronger ties and sign a free trade agreement.

Muizzu was addressing the official Independence Day function in the Maldives on Friday. During his address, he commended the administration’s foreign policy, celebrating eight months of ‘diplomatic success,’ according to the Maldives President Office.

President Muizzu expressed gratitude to India and China for their support in easing the Maldives’ debt repayment, thereby enabling the country to ensure economic sovereignty.

Emphasising the need to alleviate the local shortages of US dollars, he said that the Maldives government is negotiating currency swap agreements with both New Delhi and Beijing.

The Maldives President also announced that his administration is negotiating a Free Trade Agreement (FTA) with the United Kingdom and expressed hope to reach a similar agreement with India.

Notably, the Mohamed Muizzu government in the Maldives took a reconciliatory tone after ties between the two nations soured, leading to a diplomatic row.

Last month, President Muizzu also attended the oath ceremony of Prime Minister Narendra Modi, after he took office for the third consecutive term.

Earlier this year, Muizzu sought debt relief measures in the repayment of the hefty loans taken from the country over consecutive governments. He even stated that India will continue to remain the Maldives’ “closest ally” and emphasised that there was no question about it.

The loan amount owed by Maldives to India by the end of last year stood at 6.2 billion Maldivian Rufiyaa, according to Maldives-based The Edition.

Notably, earlier this year, the International Monetary Fund (IMF) warned Maldives that it faces a high risk of debt distress without significant policy changes.

Notably, Maldives President Mohamed Muizzu has displayed ‘anti-India’ rhetoric and he even ran the electoral campaign on the line of ‘India Out’. The removal of Indian troops from the country was the main election campaign of Muizzu’s party.

Since coming to power, he has taken several steps that have been unconventional from the point of view of India-Maldives ties.

He departed from a long convention by not visiting India on the first official visit and instead went to Turkey, followed by China. During his visit, the two countries elevated their ties to comprehensive strategic cooperative partnership and signed around 20 agreements.

Last December, the Maldives said it would not renew the Hydrographic Survey agreement made with India.

After Muizzu government officially requested India to withdraw troops, the Indian government set up a High-Level Core Group to discuss the matter. The withdrawal of Indian troops was completed in May this year.

Days after the withdrawal of Indian soldiers, Maldives Defence Minister Ghassan Maumoon also acknowledged that the country’s defence forces were capable of operating the three aircraft donated by India,

The row between New Delhi and Male erupted after three Maldivian deputy ministers made derogatory comments against Prime Minister Narendra Modi, over his pictures from the visit to Lakshadweep.

PM Modi had called for the Indian island cluster to be developed as a destination for beach tourism and promotion of domestic tourism.

The matter snowballed into a major diplomatic row, with New Delhi summoning the Maldivian envoy and registering a strong protest against the viral posts. The three deputy ministers were suspended and they remain under suspension with pay.

Maldives Tourism Ministry data showed, earlier this year, that the number of Indian tourists visiting the Maldives dropped by 33 per cent as compared to last year.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

“The people have decided and don’t want Indian troops to stay in the Maldives. Therefore, foreign soldiers cannot be here against our sentiments, against our will,’’ the President-elect said.
| Photo Credit: AFP

India looks forward to engaging the new Maldives government on “all issues”, the Ministry of External Affairs (MEA) said on Thursday, responding to the Maldivian President-elect Mohamed Muizzu’s statement that Indian military personnel would be asked to leave the islands.

On Wednesday evening, Indian High Commissioner to Male Munnu Mahawar met Mr. Muizzu, and handed over a letter from Prime Minister Narendra Modi congratulating him on his electoral victory.

“Our High Commissioner in Male called on the President-elect, and he had a good discussion on various aspects of our bilateral relationship including development cooperation,” MEA spokesperson Arindam Bagchi said. 

‘India Out’ campaign

Last Saturday’s run-off election saw Mr. Muizzu, the former Mayor of Male, defeat incumbent Maldives President Ibu Solih by 19,000 votes, or an 8% margin. The results have been widely seen as an upset for India, that had close ties with the Solih administration. Speaking at a public rally after the elections, Mr. Muizzu, who stood as the candidate for the PNC-PPM coalition that had campaigned on an “India Out” plank, had said that the “sovereignty” of the Maldives was most important.

“The people have decided and don’t want Indian troops to stay in the Maldives. Therefore, foreign soldiers cannot be here against our sentiments, against our will,’’ the President-elect was quoted as saying by Maldivian news outlets on Tuesday.

“So, I have to tell the [Indian] ambassador who is going to meet me that we will have a very good relationship with these values,” he had added. 

Coast Guard project opposed

While India has had a strong military presence in the Indian Ocean Region (IOR) for many years, naval and airforce personnel have been stationed in the Addu and Lammu islands since 2013 in order to maintain and operate two helicopters and Dornier aircraft that India had loaned the Maldives for reconnaissance operations over the past decade. In November 2021, the Maldives National Defence Force told a Parliamentary Committee that a total of 75 Indian military personnel were stationed in the Maldives.

In February 2021, the Maldivian opposition protested an MoU or draft agreement on maritime security signed by External Affairs Minister S. Jaishankar with the Maldives Defence Minister, in order to construct a Coast Guard harbour base at the Uthuru Thilafalhu atoll. The construction was inaugurated during a visit by Defence Minister Rajnath Singh in May this year, and this has been the focus of the PPM’s “India Out” protests. 

‘Close collaboration needed’

While the MEA spokesperson did not specifically respond to Mr. Muizzu’s threat to remove Indian military personnel — a move that could overturn an important component of India-Maldives strategic ties in the past few years — he said that the two countries needed to cooperate “closely”.

“The focus of our partnership with Maldives has always been on capacity building and working together to address our shared challenges and priorities. As neighbours, we need to collaborate closely to address the challenges confronting our region such as transnational crimes and Humanitarian Assistance Disaster Relief,” Mr. Bagchi said, adding that the government looks forward to “engaging with the new administration in Maldives on all such issues.” 

Voters seen at a polling station in Maldivian capital Male Saturday morning, on the day of the Presidential elections of the Indian Ocean Archipelago.
| Photo Credit: Meera Srinivasan

 Maldivian voters, known for their high, near-90% turnout in past elections, began lining up at polling stations in capital Male early on Saturday, to choose their President in a crucial contest.

Several schools, set up as polling stations, were buzzing with early voters. While eight candidates, including three independents, are running for the country’s top office, for voters it was a choice between continuity and change.

“I wouldn’t necessarily say I want change, but I certainly want improvement in planning policy and implementing it,” said a 33-year-old voter who asked not to be named. “I am here to basically exercise my democratic right,” she told The Hindu, outside a polling station.

Incumbent Ibrahim Mohamed Solih, elected in 2018 from the ruling Maldivian Democratic Party (MDP), is seeking a second term after his party split with Parliamentary Speaker and former President Mohamed Nasheed deciding to break away. His supporters formed The Democrats and have fielded a separate candidate. Male Mayor Mohamed Muizzu, backed by the People’s National Congress in the main oppositional camp, has emerged an important contender, according to local political observers.

Most candidates, including President Solih, have promised good governance, economic development and opportunities for youth in their manifestos. Some voters said the televised debate helped them make up their mind. “I did not want to go just by the poll manifesto, so I took a decision based on the debate. I think we need a leader who has a clear vision and the ability to express it to the public,” said a first-time voter, also requesting anonymity.  

As many as 574 ballot boxes have been placed across the capital, and in over 300 atolls, in addition to tourist resorts and overseas election centres, the island nation’s Election Commission said, highlighting the logistics behind the elections. The Indian Ocean archipelago has a 99.4 % literacy rate, and of its 5.2 lakh-population, more than half are eligible to vote. If no candidate secures over 50 % of the vote, a run-off election will have to be held within 21 days, authorities said.