India’s Modi announces credit worth $565 million to the Maldives and launches free trade talks

COLOMBO, Sri Lanka (AP) — Indian Prime Minister Narendra Modi on Friday announced a $565-million line of credit to the Maldives during a visit to the Indian Ocean archipelago, as the two countries launched formal talks for a free-trade agreement.

Modi is visiting the Maldives, known for its upmarket tourist resorts, to mark the 60th anniversary of its independence and diplomatic relations between the two countries. The announcement came during Modi’s joint media statement with Maldives’ President Mohamed Muizzu.

The two-day visit is crucial to India’s ambition to control the seas and shipping routes of the Indian Ocean in a race with its regional rival China. It also marks the further easing of diplomatic tensions between the two nations that followed the election of pro-China Muizzu in 2023.

Regional powers India and China compete for influence in the archipelago nation, which is strategically located in the Indian Ocean.

On Friday, Modi witnessed the exchange of agreements to cooperate in sectors such as fisheries, health, tourism and digital development. He also formally handed dozens of heavy vehicles to the Maldives’ defense forces.

“India is Maldives’ closest neighbor. Maldives holds an important place in both India’s neighborhood- first policy and ocean vision,” Modi said. “India is also proud to be Maldives’ most trusted friend.”

The line of credit will be used for “infrastructure and development projects in line with the priorities of the people of the Maldives,” he said.

“India will continue to support Maldives in developing its defense capabilities. Peace, stability and prosperity in the Indian Ocean region is our common goal,” he added.

During Muizzu’s visit to India last October, India announced financial support to the cash-strapped Maldives in the form of a $100-million treasury bills rollover and the countries signed a $400-million currency swap agreement.

Tensions between India and the Maldives grew since Muizzu, who favored closer ties with China, was elected in 2023 after defeating India-friendly incumbent Ibrahim Mohamed Solih. Leading up to the election, Muizzu had promised to expel Indian soldiers deployed in the Maldives to help with humanitarian assistance. Last year New Delhi replaced dozens of its soldiers in the Maldives with civilian experts.

Measure by Modi to promote tourism in India’s Lakshadweep archipelago, off the southwestern coast of the Indian mainland, also sparked anger from Maldivians, who saw it as a move to lure Indian tourists away from their country. Indian celebrities then called for a tourism boycott to the Maldives.

The dispute deepened when Muizzu visited China ahead of India in January last year, a move seen by New Delhi as a snub. On his return, Muizzu spelled out plans to rid his tiny nation of dependence on India for health facilities, medicines and import of staples.

Relations started to improve after Muizzu attended Modi’s swearing-in ceremony for a third five-year term. Muizzu has toned down his anti-Indian rhetoric, and official contacts with New Delhi have intensified as concerns grew about Maldives’ economy.

India has long been a critical provider of development assistance to the Maldives. Meanwhile, the Maldives joined China’s Belt and Road Initiative in 2013 to build ports and highways and expand trade as well as China’s influence across Asia, Africa, and Europe.

Modi will attend the Maldives’ 60th independence anniversary from being a British protectorate on Saturday.