Mauritius | Finances

November 04, 2013

Budget: Spiral of Debt and Investments

In one year, the public debt increases to Rs 17.5 billion, of which Rs 9.8 billion from foreign sources

As the deadline for the presentation of the budget in 2014 by the Deputy Prime Minister and Finance Minister Xavier-Luc Duval, approximates the feel good on factoring are more rare economically. Besides the fact that the latest edition of MCB Focus (No. 55), published last Thursday by one of the country's two largest commercial banks, the Mauritius Commercial Bank, highlighted the potential risks to growth and the employment that is the dramatic decline in private and public investment, the latest official statistics on public debt are hardly auspicious. Data published since the end of the week on the website of the Ministry of Finance confirmed an increase in the public debt to the figure of Rs 213.8 billion at the end of last September, Rs 17.5 billion more compared to the same time in 2012. In its latest assessment of Mauritius, the Economist Intelligence Unit (EIU) in London estimates that debt represents 24.5% of GDP, while the MCB feared adverse effects of debt on the "fiscal space for stimulating growth" in the economy.

On September 30, the statistics about the evolution of the spiral of debt raise concerns, even in official circles is still trying to relativize. In one year, the amount of public debt rose to Rs 17.5 billion to spend Rs 213.7 billion, or 59.1% of GDP, a decline of almost one point. For its part, the Central Government Debt to GDP ratio is 53.3%, a decline of 1.5% compared to September 2012, according to figures released by the Ministry of Finance. Since the beginning of this year, public debt has accelerated, with loans of more than Rs 15 billion achieved. So technically, the debt per capita stood at Rs 165,000, nearly Rs 15,000 more than last year.

The two main components of the debt have changed in a negative way in the last twelve months. Local government debt has reached Rs 148.1 billion in September against Rs 139.9, billion last a year. Foreign debt has been a deterioration of almost Rs 10 billion to hit Rs 44.54 billion, representing a mortgage of about 29.1% on the value of exports of goods and services in the country. The significant fact is that the Public Enterprise Debt declined Rs 1 billion, Rs 20.9 billion against Rs 22 billion in September 2012.

MCB Focus reported impact on the fiscal deficit additional expenses as an adjustment for abnormalities in the report of the Pay Research Bureau and other supplementary Expenditures. " This marks a departure from the trend that has recently brought us closer to achieving the target of bringing total public sector debt to 50% of national income by 2018 as per the Public Debt Management Act" notes Gilbert Gnany, Chief Strategy Officer and Adviser the Board of Directors of the MCB, which warns against " strains on the country’s debt position threatening to reduce the fiscal space for stimulating growth and impair our position on the international market"

Correct situation

Further, MCB Focus notes that " his would be at odds with progress hitherto realised in reducing our debt-service burden, which contributed to an upgrade in foreign and local currency government Bond ratings by Moody’s in 2012." One way to recommend to the government to correct the situation before it is too late with compound Interests for the economy in general.

" he authorities need to embrace an optimal debt strategy that strikes an adequate balance between domestic and foreign funding, bearing in mind the observed high liquidity levels prevailing in the country as well as the nature and scale of economic development imperatives "stays the MCB.

Meanwhile, the latest assessment of the economy conducted by the EIU London s 'also addresses the problem of indebtedness of Mauritius. From the outset, specialists EIU report that " Mauritius’ external financing requirement in 2013 is estimated at $ 2,2 bn. This reflects the high level of repayments due on trade-related short term debt as well as the large current-account deficit" Forecasts indicate that the external financing needs are expected to worsen by 2015 to reach $ 2.4 billion seen in relation to the rated current deficit trends and short-term debt.

" We estimate that public sector medium and long term external debt will have risen to US $ 1,63 bn at the end of 2013, a year-on-year increase of nearly 20% and we forecast that it will increase further, to US $ 2,1 bn in 2015 as government seeks to take advantage of concessionnal loans from multilateral and bilateral lenders to fund its public sector investment programme of social and infrastructure development"the EIU expects.

For EIU, the private sector debt, which amounted to $ 117 million should not entertain significant deterioration in 2014-15 "altho It Could grow more Rapidly, as share of the Authorities' for Assessment Ongoing efforts to private sector debt stocks more accurately."

The latest figures for the distribution of bank credit to key sectors economic at the end of September are as follows:

  • Construction: Rs 73.4 billion against Rs 63.1 billion in September 2012
  • Tourism: Rs 48.1 billion against Rs 43.9 billion
  • Commerce: Rs 28, 3 billion against Rs 29.5 billion
  • Households:. Rs 27.7 billion against Rs 23.1 billion

Concluding its analysis in terms of debt, EIU favors a dose of optimism for the case of Mauritius. " Total debt in 2013 is estimated at US $ 2,9 bn, equivalent to 24,5% of GDP, slighly below the median ratio for emerging markets. Despite a relatively sharp rise in nominal debt stocks; higher economic growth means that total debt levels will rise only modestly in 2014/15, reaching 27,2% of GDP in 2015"seems to console the EIU while reassuring about the ability to repay the debt by Mauritius.

 

Text by Le Mauricien
 

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