Moody’s Investors Service has maintained the current Baa1 government bond rating for Mauritius with a stable outlook according to its report released on November 24.
According to Moody’s, the affirmation of the Baa1 rating is mostly related to Mauritius having an impressive record of resiliency, good economic, institutional and fiscal strength, and low susceptibility to event risk combined with a healthy economic outlook supported by appropriate fiscal and monetary policies. The Financial Sector regulation is also broadly in line with international standards.
Mauritius local currency and deposits ceilings remain at A1, and the foreign-currency ceilings for bank deposits and bonds remain at Baa1/P-2 and A2/P-2, respectively.
It will be recalled that the rating was changed in June 2012 when Moody's upgraded Mauritius rating to Baa1 from Baa2 owing to the country’s economic performance. Since then, the economic outlook has remained stable.
The key drivers of Moody’s assessment of the country’s rating standard pertained mainly to the Mauritian economy which over the past years has been steady and well-diversified, with a broad-based growth averaging 3.6% in real terms. While the tourism and financial services industries being the main pillars of the economic base, contributing directly to approximately 10% of GDP each.
In its assessment report, Moody states that the Mauritian economy faces on-going challenges, including fostering investment, improving cost-competitiveness and maintaining the attractiveness and stability of its financial sector. However, Moody's expects that continued pro-active economic policies, a key element of the Mauritian economy's success, will gradually address those challenges.
It further points out that Economic governance is strong and business-friendly in Mauritius, as exhibited by the country's strong position in the World Bank's Ease of Doing Business ranking (32nd out of 189 countries, being the strongest country in Sub-Saharan Africa). As a result, Moody's expects Mauritius to grow continuously at robust rates.
Another determining factor is the assessment of Mauritius fiscal strength with the government debt remaining broadly stable and manageable over the next two to three years. Government’s plan is to reduce fiscal deficits substantially in order to comply with its debt target. The rating agency further observes that despite its high level, government debt remains affordable with interest charges relative to government revenue reaching 13% in 2014. In addition, it notes that the debt is primarily domestic, with the government benefiting from a relatively large domestic funding pool. A substantial part of the government's debt is held by the National Pension Fund.