India Grants ₹4,850 Crore Credit to Maldives Amid Strengthened Ties

Maldivian President Mohamed Muizzu expressed gratitude to India on 25 July 2025, acknowledging the significant role India has played in addressing his country's economic difficulties. During a two-day visit by Indian Prime Minister Narendra Modi to the Maldives, the leaders discussed plans for future cooperation between the two nations.

The visit marks a pivotal moment in India-Maldives relations, which have been improving steadily since Mr Muizzu's visit to India in October 2024. The relationship had previously faced challenges following Mr Muizzu's election due to a prevailing Indophobic sentiment.

In a joint press conference in Male, Prime Minister Narendra Modi emphasised the importance of Maldives in India's 'neighbourhood first' policy. He stated, "Maldives is an important part of our strategic partnership, showcasing cherished bilateral ties and promising cooperation in various sectors."

As part of the negotiations, India committed to extending a Line of Credit (LoC) of ₹4,850 crore (approximately USD 565 million), aimed at supporting the Maldivian economy as it grapples with liquidity issues and ongoing economic challenges. Notably, this is the first instance where India has disbursed this credit in Indian Rupees. Foreign Secretary Vikram Misri remarked, "We expect many infrastructure projects to utilise this Line of Credit."

In addition to the financial assistance, four Memoranda of Understanding (MoUs) and three agreements were exchanged, focusing on multiple areas including fisheries, tourism, environmental sustainability, and digital solutions, alongside initial negotiations for a Free Trade Agreement.

A significant aspect of this agreement is the amendment to the Maldives’ annual debt repayment obligations. Following this amendment, annual payments to India will decrease from USD 51 million to USD 29 million, marking a 40% reduction in debt burden for the Maldives.

The revitalisation of bilateral ties is viewed as a necessary step toward stabilising the region. Ahmed Shaheed, a former Foreign Minister of the Maldives and current professor at the University of Essex, stated, “This visit may well be the most influential made by an Indian leader to the Maldives.” He underscored the historical context of the relationship, noting the transition from strained ties to renewed cooperation between the two countries. He said, “This is commendable for both leaders and aligns with the long-term interests of their nations.”

In the next steps, Prime Minister Modi is scheduled to engage with the Indian community in Male and participate in events celebrating the Maldives’ 60th Independence Day over the weekend. This visit highlights a renewed commitment to collaborative development and bilateral engagement in the Indian Ocean region.