India extends financial support to Maldives as 2 nations strengthen comprehensive partnership
New Delhi, Oct 7: To address the economic challenges faced by the Maldives, the Government of India has extended a financial lifeline to Maldives in the form of USD 400 million and INR 30 billion through a bilateral currency swap agreement.
This support comes at a critical juncture, helping the Maldives navigate its ongoing financial difficulties. During a key meeting on October 7, between Prime Minister Narendra Modi and Maldivian President Dr Mohamed Muizzu, the leaders agreed to implement a broader framework for cooperation, elevating the bilateral relationship into a Comprehensive Economic and Maritime Security Partnership. The discussions covered a wide range of sectors, including economic development, maritime security, trade, and people-to-people relations, marking a new era of strategic collaboration between the two nations.
Strengthening the Bilateral Relationship
Prime Minister Modi emphasized the importance of the Maldives within India’s "Neighbourhood First" policy and Vision SAGAR (Security and Growth for All in the Region). He reaffirmed India’s commitment to assisting the Maldives in its developmental journey and economic recovery. President Muizzu, in turn, expressed gratitude for India’s timely financial assistance, including the extension of T-bills worth USD 100 million in May and September 2024. This assistance provided a crucial financial cushion for the Maldives during its time of need, helping the country address its urgent fiscal requirements. The President also acknowledged India's role as a dependable partner during previous crises, such as the 2014 Malé water crisis and the global Covid-19 pandemic.
Building the Future Together
The meeting between the two leaders produced a range of agreements that highlighted the commitment of both nations to mutual development and economic progress. The meeting is more important as the strained relationship immediately after the new President of Maldives took place led to some uneasiness and dip in business and tourism. India and the Maldives pledged to collaborate on several infrastructure projects, from ports and airports to housing, hospitals, and roads, which are expected to benefit the people of the Maldives directly. These projects are not just about infrastructure but about fostering social and economic development across the archipelago.
The two countries reaffirmed their commitment to the flagship Greater Malé Connectivity Project (GMCP), a crucial infrastructure initiative designed to improve connectivity between the capital and surrounding islands. They also agreed to conduct a feasibility study on extending connectivity to Thilafushi and Giraavaru islands, a move that could further stimulate economic activity and decongest existing urban canters.
Another focus on the developmental cooperation was placed on the Thilafushi Port Development project. Both sides agreed to expedite the development of a state-of-the-art commercial port at Thilafushi Island to relieve pressure on Malé Port and enhance the Maldives’ cargo handling capabilities. Beyond port development, the two nations are also exploring opportunities for transshipment facilities and bunkering services as part of the Maldives Economic Gateway project at Ihavandhippolhu and Gaadhoo islands, which could establish the Maldives as a key maritime hub in the Indian Ocean.
Further agreements were made to jointly harness the potential of the Hanimaadhoo and Gan airports, which are being developed with Indian assistance. Both sides will explore measures to strengthen air connectivity, attract investments, and collaborate on the efficient management of these and other airports in the Maldives. This effort aligns with India’s broader vision of promoting connectivity across the region, improving both the tourism sector and trade flows.
Trade and Economic Cooperation: Tapping Untapped Potential
Recognising the untapped potential for bilateral trade and investment, India and the Maldives agreed to explore deeper economic cooperation. One of the key discussions was on initiating a Bilateral Free Trade Agreement (FTA) that would focus on trade in goods and services, enhancing market access for businesses on both sides. Such an agreement would benefit both countries by reducing tariffs and barriers to trade, fostering closer economic ties.
To further boost trade, the two countries have committed to operationalizing the settlement of trade transactions in local currencies, a step that could deepen trade linkages while reducing reliance on foreign currencies. This shift towards local currency trade is expected to stabilise foreign exchange reserves and streamline cross-border transactions between the two nations.
India and the Maldives also agreed to strengthen bilateral investments, improve ease of doing business, and enhance engagements between business chambers and entities from both countries. Efforts will also be made to diversify the Maldives' economy by focusing on areas such as agriculture, fisheries, oceanography, and the blue economy, as well as academic linkages and research collaborations.
Digital and Financial Cooperation
India and the Maldives will cooperate on Digital Public Infrastructure (DPI), introducing India’s Unified Payments Interface (UPI) and Unique Digital Identity to the Maldives. This collaboration aims to improve e-governance and service delivery through the digital domain, benefitting the Maldivian people by making government services more accessible and efficient.
India’s RuPay card, launched in the Maldives, is expected to ease payments for Indian tourists and facilitate smoother transactions in the tourism sector. Similarly, both sides agreed to explore ways to extend these digital financial services to Maldivian nationals visiting India, fostering greater convenience for cross-border visitors.
Energy Cooperation
The two sides agreed to cooperate on renewable energy projects, including solar power initiatives, to reduce energy costs and help the Maldives meet its Nationally Determined Contributions (NDCs) under the Paris Agreement. This cooperation will include knowledge-sharing on energy efficiency measures and technical projects aimed at reducing the Maldives' dependence on expensive fuel imports.
In addition, both countries will explore the Maldives’ participation in the One Sun One World One Grid initiative, a visionary project that seeks to create a global interconnected grid for renewable energy. The Maldives stands to benefit from being part of this initiative, which could enhance its energy security and contribute to global climate goals.
Health Cooperation and Improving Lives
The two nations agreed to work on improving the healthcare infrastructure in the Maldives, including affordable access to Indian medical services. India will assist the Maldives in improving mental health services, establishing drug de-addiction and rehabilitation centres, and supporting the development of regional and central mental health services.
Both countries are also exploring ways to improve the availability of affordable medicines in the Maldives by establishing India-Maldives Jan Aushadhi Kendras, which will provide generic drugs from India. Additionally, they will collaborate on health research initiatives focused on addressing shared health challenges, such as cancer and infertility, while enhancing the capacity of Maldivian healthcare professionals through training programs.
Capacity Building and Training
Both leaders acknowledged the importance of capacity building and training in strengthening human resources and agreed to expand support in this area. India will continue offering customised training programs for Maldivian civil servants and local government representatives. Moreover, a new program will be launched to promote women-led development, providing skills training and support to Maldivian women entrepreneurs to enhance their participation in the economy.
Another significant initiative includes collaboration on establishing a Start-up Incubator-Accelerator in the Maldives, which will help harness the innovation potential of Maldivian youth, fostering a more entrepreneurial environment.
People-to-People Linkages
The two nations emphasised the importance of people-to-people linkages, which have been the foundation of their unique relationship. To deepen these ties, they agreed to work towards establishing a Maldivian consulate in Bengaluru and an Indian consulate in Addu City. These consulates are expected to boost trade, tourism, and cultural exchanges while expanding economic cooperation. Both countries are also looking to enhance air and maritime connectivity to facilitate travel, economic engagement, and promote tourism.
A Shared Vision for the Indian Ocean
India and the Maldives reaffirmed their close cooperation in regional and international forums. As founding members of the Colombo Security Conclave (CSC), they committed to working together on advancing common maritime and security interests. This collaboration will help ensure a safe, secure, and peaceful Indian Ocean Region, benefiting not only India and the Maldives but the entire region.
A New High-Level Core Group
To ensure timely implementation of these agreements, both leaders agreed to establish a High-Level Core Group. This group will oversee progress in executing the vision for a Comprehensive Economic and Maritime Security Partnership, ensuring that the initiatives benefit the people of both nations and contribute to regional stability.
