Maldives president visits India amid trouble in tourist paradise

Maldivian President Mohamed Muizzu is expected to seek a bailout during his visit to India this week as the archipelago nation stares at an economic crisis with fears of debt default.

It’s Muizzu's first official bilateral visit after he was voted to power late last year following a campaign centred on an 'India out' policy, with a promise to reduce Delhi's influence.

Since then, ties have been strained between the countries but experts say the visit indicates that the Maldives can't afford to ignore its giant neighbour.

The foreign exchange reserves of the Maldives stood at about $440m (£334m) in September, just enough for one-and-a-half months of imports.

Last month, global agency Moody’s downgraded the Maldives' credit rating, saying that “default risks have risen materially”.

An Indian bailout will bolster the country’s foreign currency reserves.

Soon after he took charge, Muizzu chose to travel to Turkey and China before visiting India - his visit to Beijing in January was seen as a high-profile diplomatic snub to Delhi as previous Maldivian leaders first visited Delhi after being elected. Around the same time, a controversy erupted in India after three Maldivian officials made derogatory comments about Prime Minister Narendra Modi.

“President Muizzu’s visit is a turnaround in several ways,” says Azim Zahir, a Maldives analyst and lecturer at the University of Western Australia.

“Most notably, the visit is a realisation of how dependent the Maldives is on India, a dependency that no other country will find easy to fill,” he says.

The Maldives consists of about 1,200 coral islands and atolls located in the middle of the Indian Ocean. The archipelago has a population of about 520,000 compared to India’s 1.4 billion.

As a small island nation, the Maldives depends on its giant neighbour India for most of its food, infrastructure building and healthcare.

Delhi and Male have not officially confirmed that a financial package for the Maldives is on the agenda during the visit. But experts believe it will be part of the discussion.

“The key priority of Muizzu’s visit is to secure a financial helpline in the form of grant-in-aid and restructuring debt repayments,” a senior Maldivian editor, who did not want to be identified, told the BBC.

Muizzu also wants a “$400m currency swap deal sought by the Maldives central bank to shore up depleted foreign exchange reserves”, he added.

The ratings agency Moody’s further expressed serious concerns over Male’s financial situation, saying that "(foreign) reserves remain significantly below the government’s external debt service of around $600m in 2025 and over $1bn in 2026".

The public debt of the Maldives is about $8bn, including about $1.4bn it owes each to China and India.

“Despite Muizzu stating on several occasions that China has given a green signal for deferring debt payments for five years, financial assistance from Beijing has not been forthcoming,” the Maldivian editor said.

With no other country coming to the rescue, it appears that Muizzu is now reaching out to India to mend strained ties.

“It’s about resetting the tone and negative rhetoric from senior officials of Muizzu’s government that has considerably impacted Indian tourist arrivals,” says Zahir.

India has long wielded influence over the Maldives, whose strategic position in its backyard allowed it to monitor a crucial part of the Indian Ocean. But Muizzu wanted to change that by moving closer to China.

In January, Muizzu’s administration gave an ultimatum to India to withdraw about 80 troops based in the country. Delhi said they were stationed there to man and operate two rescue and reconnaissance helicopters and a Dornier aircraft it had donated years ago.

In the end, both countries agreed to replace troops with Indian civilian technical staff to operate the aircraft.

A month after assuming charge, Muizzu's administration also announced that it would not renew a hydrographic survey agreement with India that was signed by the previous government to map the seabed in the Maldivian territorial waters.

Then a row broke out after three of his deputy ministers made controversial comments about Modi, calling him a “clown”, “terrorist” and a "puppet of Israel".

The remarks set off an uproar and calls to boycott the Maldives on Indian social media. Male said the comments were personal and did not represent the views of the government. The three ministers were suspended from the cabinet.

In what was seen as a thinly-veiled criticism of the reaction on Indian social media, Muizzu said at the time: “We may be small, but that doesn’t give you the licence to bully us.”

Muizzu’s administration also allowed the port call of a Chinese research ship, Xiang Yang Hong 3, much to Delhi's displeasure. Some saw it as a mission to collect data which could - at a later date - be used by the Chinese military in submarine operations.

Nevertheless, there was a thaw in bilateral ties after Muizzu attended the swearing-in ceremony of Modi after he was elected for a third consecutive term in June this year.

In August, Indian Foreign Minister S Jaishankar's visit also gave a reboot to bilateral ties.

"The Maldives is one of the cornerstones of our ‘Neighbourhood First’ policy," Jaishankar said in Male.

“To put it succinctly in the words of my Prime Minister Narendra Modi - for India, neighbourhood is a priority and, in the neighbourhood, Maldives is a priority,” he added.

For Delhi, it’s a welcome change as it recently witnessed the ouster of the India-friendly government of former prime minister Sheikh Hasina in Bangladesh and the return of KP Sharma Oli, who used to criticise India’s policies, as the prime minister of Nepal.

Muizzu has realised that antagonising India is not an option and his pragmatism is not without reason. The number of Indian tourists visiting the Maldives dropped by 50,000 in the past year, resulting in an estimated loss of about $150m.

He is aware if he doesn’t get financial support from India, the Maldives could become a paradise lost. That’s why his India visit is crucial.