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 (FTA) between the Maldives and China that was signed in December 2017. The trade deal that was signed during Mr Yameen's presidency remains in limbo, as it is currently being reviewed by Mr Solih's administration. We believe that the government will withdraw from this agreement within the forecast period.

In a television interview in October 2019, Mr Nasheed stated that the cost of infrastructure projects financed and implemented by Chinese companies has been inflated. He (and others) has suggested that the amount of debt owed to China is much larger than the government had previously admitted. However, we do not believe that these claims are well-founded. Yet 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. China is the largest source of tourists for the Maldives and accounted for 17% of the 1.7m tourists who arrived in the country in 2019.

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.

The Maldives re-joined the Commonwealth in February 2020, following the country's departure from the association in October 2016. India was one of its strongest supporters in the bid for readmission and had called for the expedition of the process on several occasions. The inclusion of the country in the Commonwealth will boost the government's efforts to showcase the country as a progressive and stable democratic player on the international scene. It will also enable the country to forge deeper diplomatic ties with other major democracies, including Canada, Australia, New Zealand and the UK and engage more closely with the wider international community.