China and India are significant bilateral lenders to the Maldives, which is facing financial challenges due to its high foreign debt, amounting to US$3.37 billion in the first quarter of this year, representing around 45 per cent of its GDP. Despite warnings of a possible sovereign default, the Maldives has stated that it has no plans to seek a bailout from the International Monetary Fund. Instead, the country has secured a “line of credit arrangement” from India, which the Maldivian government views as a positive step.
In June, Maldivian Minister of Finance Mohammed Muizzu visited New Delhi to attend Prime Minister Narendra Modi’s inauguration following his re-election. This visit highlights the close ties between the Maldives and India, which have been further emphasized by a visit from India’s Foreign Minister Subrahmanyam Jaishankar to Male in August. The Maldives, known for its luxury holiday destinations, has also become a geopolitical hotspot due to its strategic location in the Indian Ocean, with global shipping lanes passing through its chain of coral islands.
India has expressed concerns about China’s increasing presence in the Indian Ocean, especially with regards to its relations with countries like the Maldives and Sri Lanka. The Indian government has historically viewed the Maldives as part of its sphere of influence, and it is closely monitoring China’s activities in the region. Despite this, the Maldivian government has shifted its stance towards India under Muizzu’s leadership, signaling a desire to maintain a balance in regional relationships and not replace Indian forces with Chinese troops.
Muizzu has emphasized the longstanding ties between the Maldives and India, describing it as a historic relationship built on shared values and centuries of exchanges. This relationship is considered essential for both countries, with deep-rooted connections that go beyond just economic and strategic interests. Muizzu’s efforts to strengthen ties with India and maintain a balance in regional relationships indicate a pragmatic approach to diplomacy that prioritizes stability and cooperation in the region. By securing a line of credit from India, the Maldives is taking steps to manage its debt burden and ensure financial stability in the face of external challenges.
The Maldives’ strategic location and economic vulnerabilities have made it a focal point for regional powers like China and India, both of which have competing interests in the Indian Ocean. The Maldivian government’s decision to seek financial assistance from India while maintaining balanced relationships with other nations reflects its efforts to navigate complex geopolitical dynamics in the region. As the Maldives continues to work towards addressing its debt concerns and economic stability, its relationships with key regional players like China and India will play a crucial role in shaping its future trajectory.
