Mauritius Government Debt Rises to 79% of GDP – Note
High debt has bedridden Africa, with most countries in the region barely surviving without external debt. This trend has placed a pause on the Africa rising tantrum; at least for a long while, the shine has reduced sharply.
Following a periodic review, Moody’s said Mauritius’ Baa3 rating reflects strong and stable economic growth, a diversified economy, and sound policymaking, offset by a high debt burden and vulnerability to external shocks stemming from the economy’s small size and openness to trade.
The country’s fiscal deficit widened to 9.8% of GDP in the fiscal year ending June 30, 2025, with government debt rising to 79% of GDP, according to Moody’s review note.
In response, the government announced a fiscal consolidation plan beginning in fiscal 2026, targeting a reduction in the deficit to 4.9% of GDP in fiscal 2026 and 1.3% by fiscal 2028.
The country’s key reforms include pension system adjustments, tax base broadening, and rationalization of social transfers.
Moody’s said the inclusion of clear targets in the Public Debt Management Act signals the government’s commitment to medium-term fiscal discipline.
However, the scale of the adjustment requirement — targeting an 8.5% of GDP improvement in the primary balance over three years — creates substantial execution risk.
Mauritius’ “baa2” economic strength reflects its relatively high income levels, economic diversification, and low GDP growth volatility, despite its small size and exposure to external shocks.
The “baa2” institutions and governance strength is supported by strong institutional quality and a business-friendly environment, although recent data revisions and past reliance on unorthodox policies have weakened our perception of the government’s transparency and policy credibility.
The “ba1” fiscal strength assessment weighs a high debt burden against a comprehensive fiscal consolidation plan that will place debt on a downward trend, and a favorable debt structure that limits foreign exchange and rollover risks.
Mauritius’ “ba” susceptibility to event risk is driven by offshore banking sector exposure and potential capital flow volatility, mitigated by substantial international reserves and a stable political environment.
The negative outlook reflects uncertainty about the government’s ability to reverse recent fiscal deterioration given the significant fiscal adjustments that this would entail.
The plans that the government announced in June are ambitious, but they rely on politically sensitive reforms, including rationalizing social spending and transfers, and increasing taxes.
“We could return Mauritius’ outlook to stable implements a comprehensive fiscal consolidation package that offers the prospect of reversing the rise in government debt”, Moody’s said.
The ratings agency noted that signs that revenue-enhancing measures are yielding results, that the risk of a contractionary impact is contained, and that efforts to reduce spending are sustained would increase the likelihood that debt will be placed on a downward trend.
The review noted added that a clear containment of state owned enterprise-related contingent liabilities would alleviate spending pressures, triggering a return of the outlook to stable.
Analysts said delays in fiscal consolidation that lead to persistently large fiscal deficits, causing debt to stabilize at high levels, would be likely to result in a rating downgrade.
An increase in borrowing costs amid larger financing needs that weaken debt affordability would also lead to increasing negative pressure on the rating.
The crystallization of contingent liabilities without corresponding asset recognition would also likely lead to a downgrade, Moody’s stated in its latest review note on Mauritius. #Mauritius Government Debt Rises to 79% of GDP – Note#
Fitch Affirms Mozambique at ‘CCC’, Debt to GDP Falls to 91%
