Our top economists had been warning us for some time now that there was a serious risk that Moody’s would downgrade us starting with an outlook change to negative, followed by a lower than investment grade rating, or junk status.
Moody's, like other credit rating agencies, typically does not downgrade a country's credit rating suddenly, instead opting for a more gradual process by first issuing a negative outlook or warning before making a significant downgrade and often citing concerns about a country's economic or political stability that are developing over time.
As Amit Bakhirta puts it so succinctly ”nous avons désormais un pied presque dans la falaise du junk et l'autre, toujours sur la falaise. “ It’s a final wake-up call, it’s loud and clear . If we want to avoid a downgrade to junk status , we have the next 12 to 18 months to come forward with a comprehensive fiscal consolidation plan with effective policy measures that will improve our debt indicators .
But it could have been worse!
Moody’s has focused mainly on our ability to bring about a sustainable turnaround in the fiscal situation and has tended to overlook the following economic flaws and vulnerabilities:
-the cooking of data. Moody’s preferred to set its sights elsewhere. These are its comments-“The audit findings do not point to a specific deficiency in data reporting or transparency but rather highlight broader systemic gaps in the country's checks and balances, particularly those related to the oversight of State-Owned Enterprises (SOEs) and budget execution”, though in the very first para of the State of the Economy report,it is mentioned that “It is clear that there has been a deliberate trimming and cooking of data under the previous Government to convey a false sense of economic progress.”
-the chronic shortage of foreign exchange and the on-going rationing by banks and BoM’s attempts at imposing transfer and convertibility restrictions.
-our dwindling foreign currency reserves in net terms . Moody’s comments-“This reserve buffer limits risks from the country's structural current account deficits. As of December 2024, gross official international reserves stood at $8.5 billion, equivalent to more than 13 months of import coverage”
-a gradual phasing out of MIC from BoM and
-the reliability of our national statistics and budgetary figures . The new GDP and budget figures are not credible, they still carry lots of uncertainties.
But it could have been better !
Not in terms of the rating but in the comments from Moody’s which could have been more encouraging and less menacing,
-if the new Govt , now 80 days old, had restored confidence by including in its State of the Economy report , a solid fiscal consolidation plan and the main accompanying measures,
-if it had conducted an independent MIC audit and revaluation exercise followed by a gradual phase out,
-if it has sent a strong signal to the market that it is getting things under control - by pointing to a future increase in interest rate to be followed gradually by other short and long term measures -both monetary and fiscal with the support of international organisations and
-if it took the necessary measures to restore the credibility of our institutions-especially Statistics Mauritius ,the MRA and the Macro-Fiscal unit of the Ministry of Finance and
-the new Govt would have been more convincing, really geared up for the challenges ahead, if we had a full-fledged Minister of Finance to lead the reform program ensuring a better vision, cohesion and direction.
Commenting on the Moody’s rating, the MSM crowd -arguing along the same lines as our ex-FS, Ali Mansoor, that the new govt was going to install a regime of austerity - are going all out to defend their populist demagoguery or competitive welfarism which they mistakenly try to uphold as measures of a sustainable, progressive and modern welfare state.
One of the MSM stalwarts is concerned that “ cette perspective négative n'incite le gouvernement à réduire davantage les dépenses et n’ait un impact négatif sur notre État-providence”
Let us remind them that their so-called welfare measures have been categorised as a form of “techno-patrimonialism which strips itself of any emancipatory goals such as advancing social citizenship and building solidarity. Instead, it casts citizens as passive recipients of state largesse rather than active claim-making, rights-bearing actors.”
This compensatory logic does not prioritise investments in human capital or the emancipation of labour by enhancing their bargaining power, because it does not concern itself with responding to the structural conditions of the labour market. Instead, it uses fiscal policy to transfer public finances to citizens as compensation. This leaves the welfare system vulnerable to charges of 'freebies' and fiscal profligacy-The budget deficit for fiscal year 24-25 is estimated to be as high as 7.6% of GDP.
These welfare measures aren't enough to lift people out of poverty or improve their livelihoods because these are not the redistributive measures and corrective measures based on egalitarian principles implemented by the state to address existing socio-economic inequalities. They do not prioritize holistic development that goes beyond addressing immediate needs. Policies should focus on education, healthcare, development, infrastructure , creating a foundation for long-term well-being and programs that empower individuals by providing them with the necessary skills and knowledge to secure sustainable livelihoods.
Raj Ramlugun
Thanks so much for taking time and energy to enlighten us about all these economic issues and putting them in perspective. So sad that in this country we are more after salacious faits divers, endless political sagas and infotainment rather than keeping some time to empower ourselves with knowledge that matters. Keep it up 
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Pingala Kissoonah
Can't be put into better words; and if Sithanen is the de facto finance minister, then it's recipe for disaster! Wrong signals have been sent already
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Nalini Burn
Thanks for this Rattan.
I am more interested about the intersection of economic and social policy, public policy and welfare policy, underpinning the more political economy aspects. Of course, Moody's ratings don't factor any of this, focused on the macrostabilisation economics that private financial markets demand and discipline govts, not private corporations. ( US exceptionalism Musk-Trump at this moment, out of the box, so to speak!)
Who are the MSM analysts using very interesting emerging concepts to characterise India's models of welfarism and transposing it to the Mauritius one? Yamini Aiyar's " techno-patrimonial" concept is embedded in very substantive and illuminating analysis of public policy. Which she says is contextualised for India's shifting political regimes.
In my view, the context of the Mauritian case is complex in differerent ways. Because our political dynamics have historically been very different. But I had been musing about how much MSM has been borrowing from and advised towards the BJP's patrimonial template , and using direct transfers through Aadhaar. Yamini Aiyar herself says that her term is a work in progress( too brilliant, thoughtful, substantive and thorough an analyst to spout off quickly-coined terms).
Among what she says that resonates with me about the Mauritian context, is the paucity of data. There are simply not enough of a time- series of policy evaluation data to work with.
So it is not only the integrity and quality, availability and accessibility of public economic and financial data that we should be concerned about. It is also about social data. Which should make pronouncements about "welfare populist" measures as the chief culprit against fiscal consolidation very speculative. When it does not smack of ideology...
It is high time we get to grips with this in an honest and brave conversation. I'm grappling with if that space can be found in the govt programme. For this mandate, pre-election, was seen as transitioning- setting the basis for transformation. If one tries to blot out the current noise ( possible dismaying headwinds), are there pathways to constructively explore, invest in, work towards?
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Prak Nee
What I fail to understand is how all governments believe that they can keep increasing expenditure (with new social programs every year) without increasing revenue. What is worse is that they decrease revenue at the same time will all kinds of targeted tax exemption. So the country is in a double whammy of increasing expenditure and decreasing revenue. Is this a sustainable path beyond all the talk about welfare state and redistribution of wealth? Since the lifeline of Chagos lease is proving to be elusive, it’s time for the country to get down to earth and realize that nobody owes us a living. If we don’t put our fiscal house in order with new revenue generating measures and streamlining of public expenditure, there is no way we can bring down budget deficits and public debt. Unfortunately the recycled neoliberal economists advising government are incapable of new imagination. They are stuck in old worn out economic recipes.
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Horeesran Gianish
We are really in a percipice although we have an investment grade
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