This time it is about the amendment made to Public Debt Management Act that is being ignored by our dear Dr Paligadu, the Director of Audit.
The Director of Audit Report on Government Accounts for the financial year 24-25 provides detailed information on public sector debt. At paragraph 2.2.2 on page 32 of the Report, it is stated that the Public Debt Management (PDM) Act was amended in 2023 to reintroduce a public sector debt ceiling set at 80 percent of GDP.
And the Report again makes reference in the ensuing paragraphs to the statutory debt ceiling of 80 per cent of GDP, with the recommendation on page 34 that “ 𝘈𝘱𝘱𝘳𝘰𝘱𝘳𝘪𝘢𝘵𝘦 𝘧𝘪𝘴𝘤𝘢𝘭 𝘱𝘰𝘭𝘪𝘤𝘪𝘦𝘴 𝘴𝘩𝘰𝘶𝘭𝘥 𝘣𝘦 𝘥𝘦𝘷𝘦𝘭𝘰𝘱𝘦𝘥 𝘢𝘯𝘥 𝘪𝘮𝘱𝘭𝘦𝘮𝘦𝘯𝘵𝘦𝘥 𝘣𝘺 𝘵𝘩𝘦 𝘔𝘪𝘯𝘪𝘴𝘵𝘳𝘺 𝘰𝘧 𝘍𝘪𝘯𝘢𝘯𝘤𝘦 𝘵𝘰 𝘳𝘦𝘴𝘵𝘰𝘳𝘦 𝘵𝘩𝘦 𝘗𝘶𝘣𝘭𝘪𝘤 𝘚𝘦𝘤𝘵𝘰𝘳 𝘋𝘦𝘣𝘵-𝘵𝘰-𝘎𝘋𝘗 𝘳𝘢𝘵𝘪𝘰 𝘵𝘰 𝘣𝘦𝘭𝘰𝘸 𝘵𝘩𝘦 𝘴𝘵𝘢𝘵𝘶𝘵𝘰𝘳𝘺 𝘵𝘩𝘳𝘦𝘴𝘩𝘰𝘭𝘥 𝘰𝘧 80 𝘱𝘦𝘳 𝘤𝘦𝘯𝘵”.
The Director of Audit has ignored the amendment subsequently made in the Finance Act 2025, to Section 7 of the PDM Act, 𝙥𝙧𝙤𝙫𝙞𝙙𝙞𝙣𝙜 𝙩𝙝𝙖𝙩 𝙩𝙝𝙚 𝙥𝙪𝙗𝙡𝙞𝙘 𝙨𝙚𝙘𝙩𝙤𝙧 𝙙𝙚𝙗𝙩 𝙖𝙨 𝙖 𝙥𝙚𝙧𝙘𝙚𝙣𝙩𝙖𝙜𝙚 𝙤𝙛 𝙂𝘿𝙋 𝙨𝙝𝙖𝙡𝙡 𝙣𝙤𝙩 𝙚𝙭𝙘𝙚𝙚𝙙 75% 𝙖𝙩 𝙩𝙝𝙚 𝙚𝙣𝙙 𝙤𝙛 𝙛𝙞𝙨𝙘𝙖𝙡 𝙮𝙚𝙖𝙧 2030, 𝙖𝙣𝙙 𝙨𝙝𝙖𝙡𝙡 𝙣𝙤𝙩 𝙚𝙭𝙘𝙚𝙚𝙙 60% 𝙖𝙩 𝙩𝙝𝙚 𝙚𝙣𝙙 𝙤𝙛 𝙛𝙞𝙨𝙘𝙖𝙡 𝙮𝙚𝙖𝙧 2035 𝙖𝙣𝙙 𝙩𝙝𝙚𝙧𝙚𝙖𝙛𝙩𝙚𝙧. The statutory debt threshold is not 80%.
This is a shocking error from the Director of Audit, since public sector debt concerns will be critical in determining forthcoming budget measures. The strong tax and reform measures in the last budget are expected to reduce the budget deficit from 9.3% of GDP to less than 7%. However, public sector debt as a percentage of GDP is not likely show any improvement, and is projected to remain at around 90% of GDP at end June 26.
To bring the public debt ratio down to 75% by 2030 now requires an average reduction of 4 percentage points annually. Failing to do so again in the coming financial year will imply postponing difficult and unpopular measures towards the end of the electoral mandate.
Govt could hope to engineer a decrease in the public debt ratio by boosting GDP instead. But GDP growth is sluggish, and is expected to decline further to 2.3%, in the wake of the Iran conflict, corresponding to the worst-case scenario of Statistics Mauritius.
Rising public debt means higher debt servicing costs. Interest payments on public debt, estimated at Rs 27 bn in FY25-26, now exceed estimated Govt expenditures of Rs 23 bn on education. Debt servicing and social spending are crowding out capital expenditures which account for less than 3% of total Govt expenditures. 𝙋𝙪𝙗𝙡𝙞𝙘 𝙙𝙚𝙗𝙩 𝙞𝙨 𝙖 𝙫𝙞𝙩𝙖𝙡 𝙞𝙨𝙨𝙪𝙚 𝙛𝙤𝙧 𝙥𝙪𝙩𝙩𝙞𝙣𝙜 𝙩𝙝𝙚 𝙚𝙘𝙤𝙣𝙤𝙢𝙮 𝙗𝙖𝙘𝙠 𝙤𝙣 𝙖 𝙨𝙤𝙪𝙣𝙙 𝙖𝙣𝙙 𝙗𝙖𝙡𝙖𝙣𝙘𝙚𝙙 𝙜𝙧𝙤𝙬𝙩𝙝 𝙥𝙖𝙩𝙝, 𝙖𝙣𝙙 𝙩𝙝𝙚 𝘿𝙞𝙧𝙚𝙘𝙩𝙤𝙧 𝙤𝙛 𝘼𝙪𝙙𝙞𝙩 𝙞𝙨 𝙣𝙤𝙩 𝙝𝙚𝙡𝙥𝙞𝙣𝙜, 𝙗𝙪𝙩 𝙢𝙞𝙨𝙡𝙚𝙖𝙙𝙞𝙣𝙜.
𝓣𝓱𝓮 𝓟𝓜, 𝓵𝓲𝓴𝓮 𝓽𝓱𝓮 𝓹𝓻𝓮𝓿𝓲𝓸𝓾𝓼 𝓸𝓷𝓮, 𝓼𝓱𝓸𝓾𝓵𝓭 𝓬𝓪𝓵𝓵 𝓱𝓲𝓶 𝓽𝓸𝓾𝓽 𝓭𝓮 𝓼𝓾𝓲𝓽𝓮 !
