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The recent financial aid package extended by India to the Maldives marks a significant turning point in the bilateral relationship between the two nations. The agreement, announced during Maldivian President Mohammed Muizzu's five-day visit to India, includes a $400 million currency swap deal and an additional 30 billion rupees ($357 million) in another swap agreement, allowing companies to transact in local currencies instead of US dollars. This financial assistance is intended to bolster the struggling Maldivian economy and alleviate its foreign exchange crisis.
The strained relations between India and the Maldives, which have been strained since President Muizzu took office in November 2023, appear to be thawing. Muizzu's initial decisions, including visits to Turkey and China – particularly his January visit to China, seen as a snub to India – raised concerns in Delhi. Moreover, derogatory comments about Prime Minister Narendra Modi made by three Maldivian officials further aggravated the situation. However, the Maldives' dire economic situation, characterized by dwindling foreign exchange reserves and a looming debt default, has prompted its leadership to mend ties with India, its key development partner.
The financial support package from India signals a renewed commitment to the Maldives' economic stability and development. The two nations have also agreed to initiate discussions for a free trade agreement, further strengthening their economic cooperation. This shift in approach reflects a pragmatic understanding of the challenges facing the Maldives and the potential for mutually beneficial collaborations. The Maldives, while seeking to diversify its economic partnerships, continues to rely on India's financial assistance and political support. This renewed cooperation between the two countries holds the potential to enhance regional stability and security, especially in the Indian Ocean region, which is increasingly seen as a strategic focal point in the global power dynamics.
Source: Indian financial aid opens 'new chapter' with Maldives