From "India Out" to economic dependency: Muizzu's capitulation to Modi

Last Friday, the Indian diaspora in Malé cheered Modi as he emerged after inaugurating the new defence ministry building. Cries of "Zindabad" rang out on the capital ring road where the current government's supporters previously marched in costumes and Modi masks under the "India Out" banner.

During the historic visit – as the first Indian Prime Minister to attend Independence Day celebrations in the Maldives and the first head of state or government to be hosted by President Muizzu – Modi extended a US$ 565 million credit line for infrastructure projects and reduced the Maldives' annual debt repayment obligations by 40 percent (from US$ 51 million to US$ 29 million), offering a vital lifeline to help the country avert a looming debt crisis.

But as the Maldives marked the 60th anniversary of ending British protectorate status, critics cast doubt on whether a "debt-plagued" nation dependent on Indian bailouts and essential imports could truly determine its own foreign policy.

As Indian flags that lined the streets and massive photos of Modi were displayed at the airport and the military headquarters on Malé's waterfront, Maldivians on social media questioned why a leader who was accused of undermining Maldivian independence and sovereignty was the guest of honour to celebrate Independence Day. Many saw the reversal as a humiliation for Muizzu. 

Here's how "India Out" became economic capitulation.

The roots of anti-India sentiment stretches back to the abrupt termination of the GMR airport modernisation contract in December 2012. The eviction of the Indian infrastructure giant under President Dr Mohamed Waheed – whose spokesman sparked a diplomatic row by attacking the Indian High Commissioner – drew strong protests from India, which retaliated by restricting medical visas and exports of construction materials.   

Upon succeeding Waheed, President Abdulla Yameen initially sought to repair strained ties, declaring an "India First" foreign policy and pledging to keep the Indian Ocean demilitarised. But he "looked east" to forge a development partnership with India's geopolitical rival China, stoking fears in New Delhi of possible military cooperation. 

Relations nosedived during Yameen's final year in office as he accused India of interfering in domestic affairs, and tried to send back helicopters and a Dornier aircraft donated by India for medical evacuations. According to Yameen, Indian soldiers stationed to operate the military aircraft refused to leave even when the Maldives government let their visas expire.

After defeating Yameen in September 2018, President Ibrahim Mohamed Solih restored defence and development ties, cementing the polarisation along pro-India and pro-China lines. 

Indian boots on the ground. It was primarily a demand for the expulsion of the airforce pilots and soldiers. Other specific grievances included the the alleged lack of transparency in bilateral agreements, including one for hydrographic surveys, and the development of a coastguard harbour and dockyard in Uthuru Thila Falhu.

The Progressive Congress Coalition under Yameen's leadership first rallied under the "India Out" banner in mid-2020, staging protest marches and demonstrations in Malé. Yameen returned to spearhead the campaign after the Supreme Court overturned his money laundering conviction in November 2021, leading protests on several islands and accusing the Solih administration of compromising Maldivian sovereignty by allowing India to build up a military presence.

The intensified campaign prompted the High Commission to seek greater security over "recurring articles and social media posts attacking the dignity of [the embassy and diplomats]." The Maldivian Democratic Party-led ruling coalition denounced the campaign as reckless incitement to hatred with "unsubstantiated and misguided" claims. 

Removing the Indian soldiers was the central pledge of Muizzu's eleventh-hour candidacy as Yameen's backup. The soft-spoken mayor of Malé grew uncharacteristically impassioned when he made emotive appeals to patriotism, invoking the defiance of national heroes in the face of foreign aggression. In a much-derided gesture during his inaugural address, Muizzu turned and spoke to the national flag at the Republic Square. 

The campaign theme concerning fears and anxiety over Indian military personnel was "subject to multiple online disinformation attempts," the EU election observer mission found. The disinformation was amplified by online media and "potentially swayed public opinion".

After assuming office in November 2023, Muizzu broke with tradition by not making Delhi his first port of call. Pacts with Türkiye to import staples were framed as part of attempts to reduce dependence on India. 

Badly. Upon his return from China in January 2024, Muizzu declared in a direct reference to India: "We may be small but this doesn't give you the license to bully us." The confrontational stance was in stark contrast to the more conciliatory approach in requesting the withdrawal of Indian troops in December 2023, which happened during a meeting with Modi on the sidelines of the COP summit in Dubai. 

According to a Washington Post exposé, Muizzu's strong words came after he learned of secret talks between MDP leaders and Indian agents to hatch an impeachment plot. The president "furiously instructed his allies to attack India on social media" when he learned of the conspiracy, sources told the paper. 

A full-blown crisis soon erupted when three Maldivian deputy ministers made derogatory comments about Modi on social media after his visit to promote tourism in the Lakshadweep islands. The inflammatory language – calling Modi a "clown," "terrorist," and "puppet of Israel" – triggered massive outrage in India as celebrities and social media users launched a #BoycottMaldives campaign. Tourist bookings plummeted. Indian arrivals dropped 42 percent in the first four months of 2024 compared to 2023, causing an estimated US$ 150 million in revenue losses.

In the meantime, despite Muizzu's repeated assurances of a "green signal" from China or the Middle East, no help was forthcoming. Massive debt service obligations loomed – US$ 114 million in 2024, US$ 557 million in 2025, and over $1 billion in 2026 –  and both Moody's and Fitch downgraded the Maldives' credit rating to "junk" status over the risk of a sovereign default.

Despite Muizzu's pro-China positioning and signing of various agreements during his state visit – as well as the implementation of a controversial free trade deal – Beijing appeared unwilling to restructure debt or provide emergency financial support.

During the campaign, former Islamic minister Dr Mohamed Shaheem Ali Saeed famously assured voters that Arabs would never let Maldivians go hungry ("If Arabs eat, Maldivians will eat too"). But early missteps soured relations with Saudi Arabia as the kingdom's representative who attended Muizzu’s inauguration was reportedly treated disrespectfully. The President’s Office then prematurely announced dates for Muizzu’s visit to Saudi Arabia as his first overseas trip, which was promptly cancelled.

Muizzu instead travelled to Saudi Arabia’s regional rival Türkiye and praised Turkish President Erdogan as the “leader” of the global Islamic community, which was seen as an affront to the the Saudis.

On his maiden trip to New Delhi in May 2024 following overtures to mend fences, Foreign Minister Moosa Zameer sought to reset ties and requested postponing repayment of a US$ 150 million bond owed to India. He dismissed previous allegations of Indian bullying and meddling in domestic affairs as campaign rhetoric.

A day after Zameer's talks with his counterpart on May 9, the Maldives government celebrated the replacement of 76 Indian soldiers with civilian technicians as fulfilling Muizzu's main campaign pledge. Defense Minister Ghassan Maumoon claimed this restored "full sovereign command and control" as civilian staff of the Hindustan Aeronautics – an Indian government-owned company under the control of the defence ministry – replaced the much-maligned military personnel.

When External Affairs Minister S. Jaishankar visited Malé in August 2024, Muizzu effusively praised India as "one of our closest allies and invaluable partners," and promised "full commitment to strengthening historic relations." He expressed gratitude for India’s “generous” quota for staple food imports and restructuring of debt payments.

The MDP meanwhile demanded "a public apology for the actions, lies and irresponsible comments" that had "resulted in significant damage to the Maldives foreign and economic outlook."

An op-ed titled “How can the Maldives forsake India?” by Dhauru editor Moosa Latheef echoed the new consensus. The veteran journalist recalled conversations with diplomats who lamented the folly and shortsightedness of antagonising India. The Muizzu administration would inevitably be forced to seek Indian financial support, they predicted.

In August 2024, Fitch downgraded the Maldives citing “a rising degree of uncertainty” over the country's ability to settle a US$ 25 million coupon payment due in October from a US$ 500 million sukuk, an Islamic Shariah-compliant debt instrument.

After double-digit losses, the Fitch downgrade prompted a selloff as investors dumped the Islamic bonds. Bondholders were also spooked by an aborted move by the Bank of Maldives to impose restrictions on foreign currency transactions. The dollar-denominated sukuk subsequently fell to a record low of 70 cents on the dollar, down from about 93 cents in June, raising fears that the Maldives could become the first country to default on a sukuk.

Meanwhile, in its downgrade in September, Moody’s observed that the government would have to seek financing “mainly from bilateral sources” because prohibitive rates ruled out international bond markets.

Despite Foreign Minister Zameer's fourth visit to the UAE in less than a year, investors saw “no sign” of forthcoming help from either India or China, the Financial Times reported. Gross international reserves stood at US$ 322 million at the end of September, barely enough to cover imports for a month.

On his belated official visit to India in October 2024, Muizzu secured a US$ 400 million currency swap, which he said “will be instrumental in addressing the foreign exchange issues we are currently facing,” lauding India as the “first responder” that has “stood by the Maldives during our times of need.”

Along with INR 30 billion for trade in local currencies, the swap arrangement was effectively an Indian bailout to prevent default. In May and September, the State Bank of India rolled over US$ 100 million worth of T-bills (short-term loans), allowing the Maldives to make the interest payment on the sukuk.

The president was excoriated over the apparent U-turn as opposition supporters shared photos of Muizzu at “India Out” protests and dredged up posts from current government officials and ruling party lawmakers accusing the MDP of undermining Maldivian sovereignty and national security by planning to open an Indian consulate in Addu City, signing a hydrography agreement, and undertaking a project to develop a naval dockyard – all of which was part of a comprehensive "Vision Document" unveiled after Muizzu's talks with Modi.

Ahead of Modi's state visit over the last weekend, Indian Foreign Secretary Vikram Misri told the press that "their term has been extended here and they continue to be used as per the request of the Maldivian authorities."

The agreements reportedly expired in February this year. The Muizzu administration has yet to publicly confirm the renewal.

MDP figures reiterated their calls for a public apology.

Not exactly. But he faced fire from his conservative right flank. Modi's visit "showed the whole world that the Maldives' political independence has been enslaved," declared former president Yameen, who has been one of the president's harshest critics since falling out with Muizzu a week into the new administration. 

"'India-First' is an old & outdated concept. We must free ourselves from the debt... We must stop taking the begging-bowl to our neighbours," tweeted former home minister Umar Naseer. 

Abdulla bin Mohamed Ibrahim, Muizzu's brother-in-law and head of the religious organisation Salaf, deleted a social media post calling Modi a "terrorist who kills Muslims" and "a great enemy of Islam, who destroyed the Babri Mosque." 

It was not permissible for Maldivians as Muslims to honour Modi, whose government was "on the front rank of enabling the Jews," Sheikh Ibrahim Nishan told Channel 13.

As a major diplomatic victory. "This visit marks a reset" after the "recent chill in ties," The Indian Express suggested, noting that Modi's meeting with leaders "across the political spectrum" demonstrated bipartisan support for the renewed partnership.

Most reports stressed how India's approach of "working hard at a relationship" and maintaining "consistent and quiet diplomacy" ultimately paid off. The Hindu reported  Foreign Secretary Misri's comment about results that were "there for all to see."

Reuters and other outlets highlighted the substantial credit line, debt relief, and currency swap agreements, which DW framed as boosting ties "as China looms."

The Economic Times described the U-turn as going "from India Out to strategic warmth," while the Hindustan Times saw Modi's bailout package "crushing Xi Jinping's Maldives strategy."

Indian media showcased tangible projects like the Thilamalé bridge as symbols of India's development partnership. India's High Commissioner told NDTV that it will "unlock enormous economic potential."