Moody's cuts Mauritius view to negative

Moody's Investors Service has lowered the outlook on Mauritius' ratings to negative from stable in light of the unfavorable direction of government finances over recent years, including high government debt.

The outlook change affects the Baa2/P-2 foreign currency country ceilings, the Baa2 foreign currency debt rating and the A2 domestic currency issuer ratings. The local currency guideline remains at Aa2.

Moody's said public debt has reached levels far above those of other countries in Mauritius' peer group in the low- to medium-investment-grade range. A plan to reduce government deficits began to show modest results in 2003 and 2004, but, aggravated by high government expenditure levels and long-term secular trends of slowing growth and rising unemployment, the improvement proved only temporary.

The agency said it is additionally concerned the country's external finances with the expiration of trade preference arrangements, such as the World Trade Organization's multi-fiber agreement, and the pending cut in subsidies for sugar exports to Europe.

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