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India has approved it will provide substantial financial support, amounting to hundreds of millions of dollars, to help the Maldives enhance its struggling economy.
The deal was announced after Maldives President Mohammed Muizzu held talks with Prime Minister Narendra Modi during his five-day visit to India.
The support includes a $400m currency swap deal and an additional 30bn rupees ($357m; £273m) in another swap agreement which will allow companies to do business in local currencies rather than in US dollars.
The Maldivian president was given red carpet treatment after relations soured in recent months. Modi called his visit a "new chapter" in ties.
"India will always be there for the progress and prosperity of the people of Maldives," he said.
The statements - and the Indian financial package - signal a significant improvement in relations between Male and Delhi, which have been strained since Muizzu came to power in November 2023.
Soon after taking over, he chose to travel to Turkey and China - his visit to the latter in January was seen especially as a high-profile snub to India as previous Maldivian leaders traditionally visited Delhi first after being elected.
Around the same time, India was angered by derogatory comments from three Maldivian officials about Modi.
But analysts say the country’s ailing economy has made its leadership mend its ties with India.
The Maldives is staring at a debt default as its foreign exchange reserves have dropped to $440m (£334m), just enough for one-and-a-half months of imports.
On Monday, Muizzu said he held "extensive discussions" with Modi to chart "a path for the future collaboration between our two countries".
He thanked India and said the budgetary support would be "instrumental in addressing foreign exchange issues".
The two countries have also agreed on a deal to start talks on a free trade agreement.
Lewis Musonye
