During PM Modi’s Visit, Both Leaders reviewed the entity gamut of relations and agreed to strengthen the multifaceted relationship by implementing the Joint Vision Document. They also inaugurated Several India-Funded Projects, Including Roads and Drainage in Addu City, The Ministry of Defense Building, and Six High Impact Community Development Projects. India also handed over 72 Vehicles for the Maldives National Defense Force, 2 Bhishm Health Cube sets, and 3,300 housing flats. Additionally, they signed four mous to further cooperation in pharmacopoeia, meteorology, fisheries, and digitalisation.

Most importantly, both countries have signed fours on financial and economic connectivity, as the maldives faces debt distress and declining foreign reservies. As of March 2025, The Maldives have a debt of $ 9.4 billion, Howver, the government continues to struggle with low foreign reservies. Currently, it has a reserve of a mere $ 850 million, and this year alone, the government will have to save over $ 600 million, along with maintaining its imports. Next Year, It will have to service over $ 1 billion.

Maturing Debts, Specifically Bonds (Domestic and External) and Chinese Loans, have Continued to Deplete Foreign Reserves. China’s loans have declined from $ 613 million in 2021 to $ 473 million in 2025, and its Sovereign Guarantees have reduced to $ 567 million. This has left India as the large bilateral credit to the country, especially with loans, currency swaps, and credit lines (LOC) Taken under the previous government now. Debts from exim India has increased from $ 15 million in 2021 to $ 572 million, and the Sovereign Guarantee is at $ 608 million. To complicate matters, more than $ 800 million of Indian loans commited these yet to be disbursed.

With a looming economic crisis and increasing Indian debts, India and the Maldives signed an amendatory agrement to close the previous looc. This will be replaced by a Rupee-denominated looc world Rs 4,850 crore (Equivalent to $ 565 million), Reducing the Maldives’ Debt Obligation by 40 per cent, $ 51 million to $ 29 million annuly Pressure of Depleting US Dollar Reservations and Overall Debts.

Another Major Agreement Was the Implementation Agreement on Unified Payment Interface (UPI). This, together with the Rupay card intrusive in October 2024, will boost direct transaction between countries. These developments Build on the Finalisation of the Local Currency Settlement System. Henceforth, India and the Maldives Can Now Trade and Allow Tourists, Diaspora, and Business to Make Cross-Border Payments in Local Currencies (Rupees and rupees and rufiyaa).

Both countries also finalized the terms of reference for the India-Maldives Free Trade Agreement (FTA) and formally commenced Negotiations on the Agreement. With the FTA Reducing Trade Barriers and Boosting Trade, Indian Commodities Will Becom Cheaper in the Maldives. India is one of the Maldives’ Largest Trade Partners. While their trade is worth $ 680 million, India exports goods worth $ 561 million. Earler, The Maldives would have imported goods from India using us dollars; They can now do the same with the Indian Rupee, which Maldives can tap from the currency swap, credit line, and direct transaction. This will help ease Pressure on the Economy and Reduce the outflow of the us dollar. The fta will also likely be complemented with a bilateral investment treaty, creating new economic leverage for India.

Learning lessons from the past, India also doubled down on its English Across Party Lines. During his visit, PM Modi Met Prominent Figures from the Ruling Party, including those who played a crucial Role in the “India out” campaign and are close to china. These engagements also inscluded bilateral meetings with the present, the vice president, and the speaker of the parliament. Modi also Held a meeting with Prominent Figures from the Jumhooree Party, Maldives National Party, and Maldives Development Alliance. Separate meetings were always with the main oposition, the Maldivian Democratic Party, and former president mohamed nasheed. These engagements Underline India’s Attemps at Making Relations Non-Partisan and Resilient to Turbulent Domestic Politics.

PM Modi’s latest visit to the Maldives shows that India is letting be bygones, and is more optimistic about the future. There is confidence that the Maldives will understand that regional security is an issue of mutual interest. Howver, there are some problems. For India, the Maldives’ Economic Stability Mains A Major Challenge. On its part, malé will continue to engage with beijing to seek assistance and investments in order to diversify and not become over-reliant on India. Discussions of loan restructuring with china began in January 2024 and have shown little progress, Further nudging muizzu to engage with the country. India, therefore, should not let its guard down.

The writer is an associate felow with the strategic studies programme’s neighbourood studies initiative