India stepped up its development assistance to the Maldives after the two leaders held talks in New Delhi on Monday in a bid to repair strained ties that saw the president of the Indian Ocean archipelago forging closer relations with China.
After the talks, Prime Minister Narendra Modi said India will offer financial support to the cash-strapped Maldives in form of a $100-million treasury bills rollover. The countries also signed a $400-million currency swap agreement.
The two leaders virtually inaugurated a new international airport in the Maldives, and Modi announced that work will be accelerated on the India-assisted Greater Male Connectivity Project, which aims to link key islands of the Maldives through modern transport networks.
“India is Maldives’ nearest neighbour and a close friend,” Modi said during a joint news conference. He said the Maldives held an important position in India's “neighbourhood first policy.”
Tensions between India and the Maldives have grown since President Mohamed Muizzu, who favors closer ties with China, was elected last year after defeating India-friendly incumbent Ibrahim Mohamed Solih. Leading up to the election, Muizzu had promised to expel Indian soldiers deployed in the Maldives to help with humanitarian assistance. In May, New Delhi replaced dozens of its soldiers with civilian experts.
In January, Maldivian leaders lashed out at Modi for promoting India’s Lakshadweep archipelago for Indian travelers. Lakshadweep is off the southwestern coast of the Indian mainland.
Maldivians saw the move as a way to lure Indian tourists away from their country. It sparked angry protests from Indian celebrities who called for a tourism boycott to the Maldives. Tourism is the mainstay of the Maldives’ economy.
The dispute deepened when Muizzu visited China ahead of India in January, a move seen by New Delhi as a snub. On his return, Muizzu spelled out plans to rid his tiny nation of dependence on India for health facilities, medicines and import of staples.
A thaw ensued after Muizzu attended Modi’s June swearing-in ceremony in New Delhi for a third five-year term. Since then, Muizzu has toned down his anti-Indian rhetoric, and official-level contacts have intensified with New Delhi as concerns rose that the Maldives could be staring at an economic crisis.
“India is a key partner in the socio-economic and infrastructure development of the Maldives and has stood by the Maldives during our times of need,” Muizzu said after the meeting. He said the currency swap agreement “will be instrumental in addressing the foreign exchange issues we are facing right now.”
Muizzu will also hold meetings with senior Indian officials during his five-day visit.
Regional powers India and China compete for influence in the archipelago nation, which is strategically located in the Indian Ocean.
For decades, India has been a critical provider of development assistance to the Maldives. Meanwhile, the Maldives joined China’s Belt and Road Initiative to build ports and highways and expand trade as well as China’s influence across Asia, Africa, and Europe.
Muizzu’s visit is essential for Modi, who is facing a challenging time in neighborhood diplomacy with Marxist politician Anura Kumara Dissanayake taking over as Sri Lanka’s president and India-friendly Bangladesh Prime Minister Sheikh Hasina fleeing to India in August after being forced to resign by students-led protests. Nepal also elected pro-China K.P. Sharma Oli as its prime minister.