The country's diplomatic relations will be guided to a large extent by its huge external financing requirements, resulting from its massive current-account shortfall. Furthermore, its strategic location in the Indian Ocean means that it will continue to garner a lot of interest from India and China, which are keen to expand their influence in the region.

Relations between China and the Maldives, which prospered under the administration of Mr Yameen, have soured sharply under Mr Solih. We expect that the government will look to revise the terms of many of the deals agreed with Chinese companies. It will also refuse to pass the legislation needed to implement the free-trade agreement between the Maldives and China that was signed in December 2017.

In a television interview in October, Mr Nasheed stated that the cost of infrastructure projects financed and implemented by Chinese companies has been inflated. Overall, we do not believe that his (and others') suggestions that the amount of debt owed to China is much larger than the government had previously admitted are well-founded. However, the terms on which the money has been lent are not transparent. Officials may well seek to renegotiate these debt deals, but we do not believe that China will be receptive. If the government presses its case too hard, it is likely that China will take steps to limit the number of Chinese tourists visiting the country. Chinese visitors accounted for 19% of the 1.5m tourists who arrived in the Maldives in 2018.

Relations with India have strengthened significantly under Mr Solih's government, and the two countries will continue to deepen bilateral ties during the forecast period. Our view is supported by a number of visits by high-level officials of both countries (including a number of meetings between Mr Solih and India's prime minister, Narendra Modi). These have been carried out in quick succession in the last year, since Mr Solih came to power. India has committed to provide additional financial support, partly offsetting the much reduced role of China in financing construction in the Maldives. Nevertheless, the local govern-ment is likely to look to balance the influence of India against other regional powers, such as the US and Japan, in order to maximise its negotiating power.