With forex for 45 days of imports, Muizzu visits India eyeing a bailout package for Maldives

File photo of Prime Minister Narendra Modi and the Maldives President Mohamed Muizzu’s meeting. Source: PTI.

In the midst of major financial trouble in tourist paradise, Maldivian President Mohamed Muizzu pays a visit to India in hopes of seeking a bailout. The visit is coming at a time when the archipelago nation is staring at an economic crisis with fears of a debt default.

This is Muizzu’s first official bilateral visit after he was voted to power in Maldives last year. Interestingly, Muizzu’s campaign centred on an “India out policy” with the promise to reduce the influence of New Delhi over the island nation. Muizzu’s advent to power sparked a diplomatic row between the two nations. Shortly after coming to power, the Maldivian president asked India to withdraw its troops from the island nation.

However, many experts believe that Muizzu’s current visit to India reflects that the Maldives “can’t afford to ignore its giant neighbour”. Now the major reason why these claims are being made is because the foreign exchange reserves of the Maldives stood at about $440m (£334m) in September, just enough for one-and-a-half months of imports.

With India’s bailout, Maldives can boost the country’s foreign exchange reserves

Last month, global agency Moody’s downgraded the Maldives’ credit rating, stating that the “default risks have risen materially”. Hence, a bailout from India would help the country’s foreign currency reserves. Before visiting India, Muizzu also travelled to Turkey and China, earlier this year.

In fact, his visit to Beijing, in January, was seen as a diplomatic snub to India, since Muizzu’s predecessors first visited New Delhi after being elected. During this time, the relations between the two nations went downhill after three Maldivian officials made derogatory comments about Prime Minister Narendra Modi.

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

It is pertinent to note that neither Delhi nor Maldives have officially confirmed that a financial bailout 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 public debt of the island nation currently stands at 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 will not attempt to appease India and mend strained ties.