NEW DELHI (Reuters) – Maldives President Mohamed Muizzu and Indian Prime Minister Narendra Modi held talks on Monday, with New Delhi promising to strengthen strategic cooperation as the island nation recovers from an economic crisis.
India approved a $400 million and a 30 billion rupee ($357.35 million) currency swap agreement, Modi said, adding that India was willing to provide extensive help to the Maldives to develop infrastructure.
Concerns have grown in recent months that cash-strapped Maldives could become the first country to default on Islamic sovereign debt but sentiment has improved since China and India, which vie for influence in the strategically located archipelago, extended fresh support lines.
India extended emergency financial support to the Maldives last month by subscribing to its $50 million treasury bill at the request of Muizzu's government, days after China agreed to strengthen trade and investment in the Indian Ocean nation.
India and the Maldives will start talks on a free trade agreement, Modi and Muizzu said.
"We will work together for stability and progress in the Indian Ocean region," Modi said after the bilateral talks concluded. Muizzu is on a five-day state visit to India.
Much of the money the Maldives owes is to China and India, which have extended $1.37 billion and $124 million in loans respectively, according to World Bank Data. The fear of Maldives' default follows a turbulent few years, as COVID-19 hammered the nation's mainstay tourism industry.
Maldives-India relations were hurt after Muizzu won power in April and demanded New Delhi replace 80 defence personnel it had stationed on the Maldives with civilians as part of his "India out" campaign. But the relationship has been on the mend following diplomatic talks and meetings since.
"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.