Update Country Report Maldives 26 Jul 2021

Event

On July 24th the Maldives' minister of foreign affairs, Abdulla Shahid, concluded a three-day official visit to India. This marked Mr Shahid's first foreign visit as president-elect of the 76th session of the UN General Assembly.

Analysis

The visit confirmed strong bilateral ties between the countries, underpinned by India's strategic interest in the Maldives' location in the Indian Ocean and the latter's large financing needs (much of which consists of massive debt owed to China). Although there has been a rise in anti-India rhetoric in the Maldives, following that country's ban on vaccine exports and a rise in local Covid-19 infections in April-May, allegedly due to the Delta variant first detected in India, The Economist Intelligence Unit does not expect it to hurt relations significantly. The Maldivian administration has been quick to thwart any such public and online protests, particularly those launched by the opposition. We maintain our view that the two countries will remain close allies in 2021-22. This will be supported by India's continuing financial support, diplomatic backing on global platforms and assistance in securing alternative vaccine grants, as well as the Maldives' opening up to Indian tourists.

During his trip, Mr Shahid held meetings with his Indian counterpart, Subrahmanyam Jaishankar, as well as the country's prime minister, Narendra Modi. The discussions involved a review of progress on projects instituted previously under the US$1.5bn line of credit. Both sides also signed a new Memorandum of Understanding on further development partnerships. This underscored the Maldives' key position under India's Neighbourhood First and SAGAR policies; the latter is an initiative for maritime co-operation in the Indian Ocean. On the tourism industry, Mr Shahid highlighted that all Indian tourists with a negative Covid-19 test are now free to visit the Maldives. He also expressed his support for India's ongoing campaign for reform and a permanent seat on the UN Security Council-a process that is stuck in inter-governmental negotiations at the UN General Assembly. This follows India's strong backing for Mr Shahid's presidential candidacy at the General Assembly.

Impact on the forecast

The visit reinforces our view that bilateral ties between the countries will remain strong in 2021-22, underpinned by the strategic location of the Maldives in the Indian Ocean and the country's substantial external financing requirements.