Update Country Report Maldives 21 Mar 2019

Event

On March 18th India's external affairs minister, Sushma Swaraj, concluded a two-day visit to Male, the capital of the Maldives. It was her first trip to the country since its new president, Ibrahim Mohamed Solih, assumed office in November 2018.

Analysis

Ms Swaraj's trip is part of a growing diplomatic rapprochement between India and the Maldives following a change in government in the archipelago. The two governments signed three agreements on visa facilitation for diplomatic and official passport holders, Indian assistance in community development projects, and renewable energy. India also renewed its export quota to the Maldives for essential commodities for a period of three years starting April 1st. These commodities included food and grains, as well as construction materials, such as river sand and stone aggregate. In June 2018 India had substantially reduced the quota by up to 98% for some items. Mr Solih and Ms Swaraj also agreed to enhance strategic and security co-operation.

The visit was aimed at increasing strategic and economic co-operation between India and the Maldives, as the authorities in the latter country seek to shift their diplomatic focus towards India and away from China. Relations with China had strengthened significantly during the term of the previous president, Abdulla Yameen. Mr Yameen's government took on a huge amount of debt from China to fund infrastructure construction, on terms that are still not clear. We believe that diplomatic relations between India and the Maldives in 2019-20 will be positive, heavily influenced by the volume of financial assistance that India will provide to the archipelago, helping it to meet its external financing needs.

Impact on the forecast

The latest developments reaffirm our view that the Maldives under Mr Solih's government will successfully cultivate closer bilateral ties with India as it reworks its relationship with China. We expect India to continue to show interest in the Maldives, owing partly to its strategic location in the Indian Ocean.