Moody's may downgrade Mauritius

Moody's Investors Service said it put Mauritius' A2 local currency rating on review for possible downgrade in light of debt levels that are far larger in relation to the size of the economy than those of the country's peers.

The agency also affirmed the negative outlook on the Baa2 foreign-currency country ceilings and the government's Baa2 foreign-currency issuer rating. The country's local currency guideline remains Aa2.

Moody's said other factors prompting the review include the subdued economic growth and spending overruns that could result in a larger-than-planned government deficit this year. Together with rising interest rates, a wider budget shortfall would likely lead to an unwelcome pause in the fiscal consolidation process.

The agency said it is particularly concerned about weakened medium-term growth prospects and the ability of the economy to recover from the trade shocks caused by last year's expiry of global textile quotas, the pending cut in subsidies of sugar exports to Europe and high oil prices. Moody's review will examine the extent to which these challenges are being addressed by the authorities, the specific sectors involved and whether and how quickly the unfavorable debt dynamics can be reversed.

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