India-Maldives open FTA talks as Modi set to visit island nation amidst diplomatic thaw
'On the economic front, one recent development which I would like to share with you is that both countries [India and Maldives] are in discussions to negotiate a free trade agreement and an investment treaty as well, while new areas of cooperation, including renewable energy, and fisheries are also in the works,' Misri said at a special press briefing.
New Delhi: India and the Maldives have begun preliminary discussions for a Free Trade Agreement, Foreign Secretary Vikram Misri said Tuesday. Malé has drawn most of the $400 million, which is the total amount covered by the first of the two currency swap agreements with India. This has helped the archipelago stave off difficult outcomes for its economy.
The preliminary discussions for a FTA between India and Maldives comes after Malé's free trade agreement with China came into effect from 1 January 2025. At the time India had voiced serious concerns over the agreement, which was first signed in 2014 and agreed to by the Maldivian Parliament in 2017.
However, following the change in government in 2018, with Ibrahim Solih assuming the presidency, the agreement between Maldives and China was suspended. Malé has also engaged with Turkey for discussions on an FTA.
Modi's is set to be the first state visit to be hosted by Maldivian President Mohamed Muizzu, since the latter assumed the presidency in November 2023. Ties have gone through a serious change in the last year, especially as Muizzu had swept to power on an 'India Out' campaign.
However, the fragile state of the Maldivian economy has required New Delhi and Malé to deepen their economic engagement, with India first announcing the roll over of a $50 million loan in May 2024. New Delhi further withdrew its roughly 80 military troops from the island country and replaced them with a technical mission following negotiations with Malé during the first half of 2024.
In the last decade, China has stepped up efforts to deepen ties with Malé, assisting with a number of infrastructure projects worth over a billion dollars. Muizzu made a state visit to China in January 2024, where over 20 agreements were signed between the two countries.
Also read: Rajnath set to meet Maldivian defence minister, India keen to hear what Malé needs
Diplomatic thaw amidst financial difficulties
In June 2024, American ratings agency Fitch had downgraded the Maldivian economy to 'junk' status due to a potential liquidity crisis. In September 2024, India rolled over another $50 million loan to Maldives, which helped thaw the diplomatic chill that had set in during the first half of 2024.
Muizzu eventually made it to India in October 2024 for a state visit. One of the outcomes of the visit were twin currency lines announced by New Delhi worth $400 million and Rs 3,000 crore respectively.
On Tuesday, Misri said, 'We extended a considerable amount of emergency financial assistance to the Government of Maldives, including through instruments such as the twin currency swap arrangements that were done when President Muizzu was also here (New Delhi) for $400 million as well as 30 billion Indian rupees.'
'It is a fact that it [Maldives] has faced a stressful financial environment, and that is why we have been giving a helping hand to Maldives in order to stabilise the financial situation. Our recent assistance has led to accretions in the foreign exchange position of the Maldives, and it is this accretion, as a matter of fact, that has been cited by international financial organisations, including the IMF, as a positive factor that has helped Maldives stave off outcomes that would be difficult for it,' added the Indian Foreign Secretary.
According to Misri, most of the $400 million swap line has been drawn by Malé and the Rs 3,000 crore swap line will soon be drawn upon, as Maldives looks to protect its economy.
Over the years, India has assisted Maldives with over a billion dollars in development assistance, along with the emergency financing it has given in the last 10 months. Modi's third visit to the island nation is set to see new development projects announced, highlighted Misri, while discussions are ongoing for new consulates to be opened by the respective governments.
(Edited by Viny Mishra)
Also read: China FTA won't benefit Maldives, hope India steps in to help avert debt default—ex-president Nasheed
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