Five pacts inked, agreement on FTA negotiations: India steps up economic aid to Maldives after talks to reset ties

Hoping to revive defence and security cooperation – it came under severe strain after the Muizzu government ordered Indian military personnel out of the island country earlier this year – India decided to refit and repair a Maldivian Coast Guard vessel that it had gifted some years ago.

The two sides agreed to launch negotiations for a Free Trade Agreement and signed five pacts including the currency swap agreement, training of judicial officers, prevention of corruption, law enforcement training, sports and youth affairs.

The two leaders also launched the Rupay card in the Maldives, while India handed over 700 social housing units and inaugurated a new runway at the Hanimaadhoo international airport.

Prime Minister Narendra Modi with Maldives President Mohamed Muizzu at Hyderabad House in New Delhi. (Express photo by Anil Sharma)

After their bilateral talks, Muizzu said, “Maldives will remain a friend committed to our shared vision of peace and development in our countries and our region.” He invited Modi to visit the Maldives next year to celebrate the 60th anniversary of diplomatic ties.

Modi described India as the “first responder” for Maldives in times of crisis – from Covid pandemic to drinking water shortage. Calling the ties as “age-old”, he said the Maldives is India’s “close neighbour” and “friendly country”. As part of India’s “neighbourhood first policy” and the “SAGAR (Security and Growth for All in the Region)” vision, he said India has fulfilled its responsibilities as a neighbour.

On the economic help for Maldives, Muizzu said, “I would like to thank Prime Minister Modi, the government and people of India for the generous assistance and cooperation extended to the Maldives over the years, including the recent budgetary support in the form of rollover of the T (treasury) bills. I am thankful for the India government’s decision to provide support in the form of 30 billion Indian rupees, in addition to the 400 million US dollar bilateral currency swap agreement, which will be instrumental in addressing the foreign exchange issues we are facing right now. Our discussions today underscored a shared commitment to remain engaged on further measures that will bolster the Maldives’ economic resilience and stability.”

On the FTA, Muizzu said, “We look forward to concluding the free trade agreement with India, which will enable us to harness the full economic potential between our countries and to increase Indian investments in both our tourism and various sectors of development.”

The economic assistance is significant since Maldives is looking at a debt default as its foreign exchange reserves have dropped to $440m (£334m), 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”. It said “(foreign) reserves remain significantly below the government’s external debt service of around $600m in 2025 and over $1bn in 2026”.

Apart from economic aid, the pillar of defence and security cooperation got a major fillip during the visit. Soon after coming to power, Muizzu asked India to withdraw its military personnel. The two countries had then agreed that India would pull out its 80-odd military personnel stationed in the Maldives between March 10 and May 10. The Ministry of External Affairs said that two helicopters and a Dornier aircraft in the Maldives would be operated by “competent Indian technical personnel” who would replace the “present personnel”.

On Monday, the joint statement titled “India and Maldives: A Vision for Comprehensive Economic and Maritime Security Partnership”, said India and Maldives share “common challenges in the Indian Ocean Region which have multi-dimensional implications for the security and development of both the countries. As natural partners, they resolve to work together in advancing maritime and security cooperation for the benefit of peoples of both India and Maldives as well as for the larger Indian Ocean Region.”

“Maldives, with its vast Exclusive Economic Zone, is exposed to traditional and non-traditional maritime challenges including piracy, IUU (illegal, unreported and unregulated) fishing, drug smuggling and terrorism. The two countries agreed that India, as a trusted and dependable partner, will work closely with Maldives in sharing of expertise, augmenting capabilities and undertake joint cooperative measures, as per needs and requirements of Maldives; they also agreed that the ongoing Maldives National Defence Force (MNDF) ‘Ekatha’ harbour project at Uthuru Thila Falhu (UTF) with India’s assistance will significantly contribute towards enhancing MNDF’s operational capabilities, and agreed to extend full support for its timely completion,” it said.

In this context, the two sides also agreed:

* To support the Maldives with provisioning of defence platforms and assets to augment capabilities of MNDF as well as that of the Government of Maldives in advancing its maritime and security requirements in line with its national priorities;

* To support the Maldives in enhancing surveillance and monitoring capability of MNDF with the provisioning of radar systems and other equipment

* To support the Maldives on hydrographic matters, including through capacity building and training, as per the requirements of the Government of Maldives;

* To strengthen cooperation in the area of disaster response and risk mitigation, including through development of SOPs and exercises to achieve enhanced interoperability;

* To assist the Maldives in the domain of information sharing by supporting the development of capabilities through infrastructure, training and sharing of best practices.

* To inaugurate at an early date the state-of-the-art Maldivian Ministry of Defence (MoD) building in Male, constructed with India’s assistance, that will augment modern infrastructural capacity of the MoD;

* To increase capacity building and training slots for MNDF, Maldives Police Services (MPS), and other security organisations of Maldives under the ITEC programmes and other customised training programmes in India;

* To extend financial assistance to develop and upgrade MNDF infrastructure.

Muizzu said, “Maldives is important for peace and stability in the Indian Ocean region, and India is an important partner in the maritime security domain.”

Briefing reporters, Foreign Secretary Vikram Misri said defence and security cooperation was “substantively and significantly” discussed during the meeting between the leaders, and there was recognition that both countries share the same “strategic landscape” and face “shared challenges” – terrorism, drug trafficking, piracy among others.

Asked if the refitting of the Coast Guard vessel will be carried out by Indian defence personnel in Maldives, he said it will be brought to India for repair and returned. He said the issue of military personnel on the two aviation platforms have been resolved to the satisfaction of both sides.

Asked if China’s activities were discussed, he said the focus was on “bilateral” cooperation. However, he pointed out that close cooperation between India and Maldives has benefited both countries in regional and international fora and amplified each other’s voice on issues of common interest.

“With the recent signing of the Charter of the Colombo Security Conclave (CSC), India and Maldives, as founding members of the CSC, further reaffirmed to work closely in advancing their common maritime and security interests with an aim to achieve a safe, secure and peaceful Indian Ocean Region. The two sides also agreed to continue working closely in multilateral fora,” the vision document stated.

Asked on the turnaround in ties, Misri said, “Yaarana chalta rahega” (friendship will continue).

On tourists from India, Muizzu said, “Our people-to-people connections have long been the foundation relationship between India and Maldives. Many Maldivians travel to India for tourism, for medical purposes, for education and for many other needs. At the same time, the Maldives hosts a large number of teams who contribute to the development of the Maldives. India is one of our largest tourism source markets, and we hope to welcome more Indian tourists to the Maldives, allowing for shared growth and understanding between our peoples.”

They also agreed to work “positively towards establishing a consulate of Maldives in Bengaluru and a consulate of India in Addu city, recognizing that these would contribute to expansion of trade and economic cooperation and greater people-to-people contacts”.