The Maldives, a small island nation in the Indian Ocean, is on the brink of an economic crisis, with its president, Mohamed Muizzu, turning to India for help during a critical bilateral visit this week. This is Muizzu’s first official state visit to India after assuming office late last year, following a campaign that promoted an “India Out” policy. The visit signals a pivotal shift in the diplomatic relationship between the two countries as the Maldives faces fears of a looming debt default.
With the nation’s foreign exchange reserves plunging to a mere $440 million in September—enough to cover only about one-and-a-half months of imports—the situation is dire. Last month, the global credit rating agency Moody’s downgraded the Maldives’ credit rating, stating that “default risks have risen materially.” A bailout from India could be the lifeline the Maldives needs to stabilize its economy and replenish its foreign currency reserves.
Muizzu’s diplomatic outreach comes after strained relations between the Maldives and India, which is significant given that India has long been a key ally of the island nation. Despite Muizzu’s earlier rhetoric that criticized India’s influence, the Maldives’ economic vulnerability appears to have forced a recalibration in his approach.
The Maldives is currently facing a severe economic crisis, compounded by declining foreign reserves and escalating public debt. The nation’s public debt has soared to an alarming $8 billion, with approximately $1.4 billion owed to both China and India, raising concerns about the government’s ability to meet its debt obligations. More worryingly, the Maldives must service external debt payments of $600 million in 2025 and over $1 billion in 2026, a burden that far exceeds its current foreign reserves.
Moody’s recent downgrade of the Maldives’ credit rating reflects growing concerns over the country’s ability to manage its debt. The agency highlighted that the government’s foreign reserves are “significantly below” what is needed to cover its looming debt repayments. This dire financial situation has left the Maldives with few options but to seek external financial assistance, and India appears to be the most viable source of immediate help.
As a senior Maldivian editor told the BBC, the top priority for President Muizzu’s visit to India is securing financial aid and negotiating the restructuring of debt repayments. Specifically, the Maldives is looking to obtain a $400 million currency swap deal from the Reserve Bank of India to help shore up its depleted foreign reserves. While the specifics of the financial package have not been confirmed, analysts believe it will be a central focus of the discussions during Muizzu’s visit.
President Muizzu’s rise to power came on the back of a populist campaign that was strongly critical of India’s influence in the Maldives, advocating for an “India Out” policy. This campaign resonated with voters who felt that previous governments had allowed India to wield excessive power in the country. Muizzu promised to reduce Delhi’s footprint in Malé and strengthen ties with other global powers, particularly China.
However, since his election, Muizzu’s administration has encountered numerous diplomatic challenges, forcing a shift in its foreign policy. His initial diplomatic moves raised eyebrows in New Delhi. In January, Muizzu made high-profile visits to Turkey and China, snubbing India, which had been the first port of call for previous Maldivian leaders. His government also caused controversy when several Maldivian officials made derogatory comments about Indian Prime Minister Narendra Modi, which led to an uproar on Indian social media and calls to boycott the Maldives.
Despite these early tensions, experts believe Muizzu has come to realize that the Maldives cannot afford to alienate its giant neighbor. As Azim Zahir, a Maldives analyst and lecturer at the University of Western Australia, put it, “President Muizzu’s visit is a turnaround in several ways. 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.”
Geopolitically, the Maldives occupies a strategic location in the Indian Ocean, making it crucial to India’s regional security interests. The archipelago consists of approximately 1,200 coral islands and atolls and is home to about 520,000 people—a stark contrast to India’s population of 1.4 billion. Nevertheless, its strategic position allows India to monitor a vital segment of the Indian Ocean, which is essential for regional stability and maritime security.
Given its proximity and size, the Maldives relies heavily on India for food, infrastructure development, healthcare, and other essential services. India has long considered the Maldives a priority within its “Neighborhood First” policy, which aims to strengthen relations with its immediate neighbors. In August, Indian Foreign Minister S. Jaishankar reiterated this sentiment during his visit to Malé, stating, “For India, neighbourhood is a priority and, in the neighbourhood, Maldives is a priority.”
India’s interest in maintaining strong ties with the Maldives has only intensified in recent years, especially as other neighboring countries, like Bangladesh and Nepal, have seen shifts in leadership that may not be as favorable to New Delhi’s strategic interests. With Bangladesh’s pro-India government under Sheikh Hasina being replaced and Nepal’s KP Sharma Oli—a leader who has previously criticized India—returning to power, Delhi is keen to avoid losing influence in the Maldives.
While the Maldives has historically maintained strong ties with India, Muizzu’s administration has sought to pivot toward China in recent months. In one of his earliest acts as president, Muizzu’s government asked India to withdraw approximately 80 troops stationed in the Maldives, who were there to operate rescue and reconnaissance helicopters donated by Delhi. While the two nations ultimately reached a compromise, agreeing to replace the Indian military personnel with civilian technical staff, the incident highlighted Muizzu’s intention to reduce India’s military presence in the country.
Additionally, Muizzu’s administration sparked further tension with India by allowing a Chinese research vessel, the Xiang Yang Hong 3, to dock in Maldivian waters. India viewed this move with suspicion, fearing that the ship could collect data useful for Chinese submarine operations in the Indian Ocean. These actions have underscored the delicate balancing act Muizzu must perform between India and China as he seeks to secure the best possible outcomes for the Maldives.
Despite Muizzu’s earlier overtures to China, Beijing has yet to offer the kind of financial support the Maldives desperately needs. Although Muizzu has claimed that China is willing to defer debt payments for five years, no substantial financial assistance has materialized from Beijing. This has left the Maldives with little choice but to turn to India for help.
For Muizzu, the decision to seek India’s assistance is not just a matter of economic necessity but also a recognition of the broader geopolitical realities. The Maldives is heavily dependent on tourism, and Indian tourists make up a significant portion of the visitors to the islands. In the past year alone, the number of Indian tourists dropped by 50,000, resulting in an estimated loss of $150 million for the Maldives’ tourism industry. This has been a wake-up call for Muizzu’s administration, which understands that strained relations with India have a direct economic cost.
“It’s about resetting the tone and negative rhetoric from senior officials of Muizzu’s government that has considerably impacted Indian tourist arrivals,” says Zahir. The economic consequences of souring relations with India, coupled with the Maldives’ deep financial troubles, have made it clear that antagonizing India is not a viable long-term strategy for the country.
As President Muizzu embarks on his visit to India, the stakes could not be higher for the Maldives. The country’s economic crisis is escalating, and without immediate financial support, it risks defaulting on its debt obligations. India, with its historical ties and strategic interests in the Maldives, appears to be the only country capable of providing the kind of assistance that can pull the nation back from the brink of economic collapse.
For Muizzu, this visit represents a pragmatic recalibration of his foreign policy. While his earlier stance was critical of India’s influence, the realities of governing a small island nation in an increasingly complex geopolitical landscape have forced him to rethink his approach. As the Maldives grapples with its economic challenges, its relationship with India will be more crucial than ever in determining its future stability and prosperity.
