India's Modi announces credit worth $565 million to the Maldives and
launches free trade talks
[July 26, 2025] By
KRISHAN FRANCIS
COLOMBO, Sri Lanka (AP) — Indian Prime Minister Narendra Modi on Friday
announced a $565-million line of credit to the Maldives during a visit
to the Indian Ocean archipelago, as the two countries launched formal
talks for a free-trade agreement.
Modi is visiting the Maldives, known for its upmarket tourist resorts,
to mark the 60th anniversary of its independence and diplomatic
relations between the two countries. The announcement came during Modi's
joint media statement with Maldives' President Mohamed Muizzu.
The two-day visit is crucial to India's ambition to control the seas and
shipping routes of the Indian Ocean in a race with its regional rival
China. It also marks the further easing of diplomatic tensions between
the two nations that followed the election of pro-China Muizzu in 2023.
Regional powers India and China compete for influence in the archipelago
nation, which is strategically located in the Indian Ocean.
On Friday, Modi witnessed the exchange of agreements to cooperate in
sectors such as fisheries, health, tourism and digital development. He
also formally handed dozens of heavy vehicles to the Maldives' defense
forces.
“India is Maldives’ closest neighbor. Maldives holds an important place
in both India’s neighborhood- first policy and ocean vision," Modi said.
“India is also proud to be Maldives’ most trusted friend.”
The line of credit will be used for “infrastructure and development
projects in line with the priorities of the people of the Maldives,” he
said.
"India will continue to support Maldives in developing its defense
capabilities. Peace, stability and prosperity in the Indian Ocean region
is our common goal," he added.
During Muizzu's visit to India last October, India announced financial
support to the cash-strapped Maldives in the form of a $100-million
treasury bills rollover and the countries signed a $400-million currency
swap agreement.
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Indian Prime Minister Narendra Modi, center, and Maldives President
Mohamed Muizzu, center right, watch a traditional welcome dance upon
Modi's arrival at the airport, in Male, Maldives, Friday, July 25,
2025. (Indian Prime Ministers Office via AP)
 Tensions between India and the
Maldives grew since Muizzu, who favored closer ties with China, was
elected in 2023 after defeating India-friendly incumbent Ibrahim
Mohamed Solih. Leading up to the election, Muizzu had promised to
expel Indian soldiers deployed in the Maldives to help with
humanitarian assistance. Last year New Delhi replaced dozens of its
soldiers in the Maldives with civilian experts.
Measure by Modi to promote tourism in India’s
Lakshadweep archipelago, off the southwestern coast of the Indian
mainland, also sparked anger from Maldivians, who saw it as a move
to lure Indian tourists away from their country. Indian celebrities
then called for a tourism boycott to the Maldives.
The dispute deepened when Muizzu visited China ahead of India in
January last year, a move seen by New Delhi as a snub. On his
return, Muizzu spelled out plans to rid his tiny nation of
dependence on India for health facilities, medicines and import of
staples.
Relations started to improve after Muizzu attended Modi’s
swearing-in ceremony for a third five-year term. Muizzu has toned
down his anti-Indian rhetoric, and official contacts with New Delhi
have intensified as concerns grew about Maldives' economy.
India has long been a critical provider of development assistance to
the Maldives. Meanwhile, the Maldives joined China’s Belt and Road
Initiative in 2013 to build ports and highways and expand trade as
well as China’s influence across Asia, Africa, and Europe.
Modi will attend the Maldives' 60th independence anniversary from
being a British protectorate on Saturday.
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