Edits & Curated By
Vishal Bhidu
In its report issued on May 4, Moody’s Ratings Issuer comment, ‘Government of Mauritius Fiscal improvement emerging despite Chagos setback, inflation risks and policy challenges’, the credit agency remarked that the jurisdiction with (Baa3 negative) has made its first tangible progress with budget execution, hinting at a material deficit for the fiscal year ending June 30, 2026.
It remarked that the deficit has narrowed to 5.5 percent of GDP as compared to 9.3 percent at the end of last fiscal year, on the back of stronger revenue and tighter spending control.
The report points out underlying expectations in relation to a high deficit poised to hit 6.5 percent of GDP during the year 2026 due to the lack of Chagos-related revenue, constraints from elevated interest costs, and an unfavorable oil price environment that could bear inflationary pressure and policy rates. Fiscal consolidation has shown early signs of progress, despite not fully adhering to the Government’s plans.
During the period of July 2025 and February 2026, the Central Government Revenue increased by 7.8 percent in relation to the corresponding period of last year, outpacing nominal GDP growth, engineered by strong income tax receipts at 15.8 percent. While expenditure saw a decline by 3.9 percent, reflecting restraint in current spending, partly offset by a sharp increase in interest payments at 23.4 percent.
The report lauds the fact that the jurisdiction has improved data transparency, comparability, accessibility, and timeliness by recently adhering to the IMF’s Special Data Dissemination Standard Plus (SDDS Plus).
Under the highest data transparency standard, the country has committed to more frequent and comprehensive dissemination of new data categories, encompassing financial sector surveys, financial soundness indicators, and investment statistics.
The SDDS Plus includes the release of more granular information in several data categories already covered under the SDDS, where Mauritius is viewed as the first in Africa and the 32nd country globally adhering to this standard.
While fiscal outcomes were falling short of expectations following the stalling of the UK (Aa2 stable)-Mauritius Chagos Archipelago treaty, and withdrawal of support from the US (Aa1 stable). At the release of the fiscal 2026 budget, local authorities expected to receive Rs 10 billion, accounting for 1.3 percent as per 2025 GDP in revenue per year from the treaty.
While the geopolitical tensions in the Middle East also led to potential headwind for the economy and fiscal position, the import basket stands under pressure on account of rising fuel prices, accounting for 4 percent of CPI and 23 percent of total good imports in 2025.
In a worst-case scenario context, higher fuel prices, according to the Moody report, could pass the inflation burden into the domestic economy since imported goods to the island may be prone to higher transportation costs. A sustained increase in fuel prices would impact tourist demand and government revenue collection.
At this point, the tourism sector seems to be weathering the conflict and appears robust, with tourist arrivals during the year’s first quarter standing at 348,000, above the 2023-24 average of 342,000.
The report highlights tourists avoiding the conflict zone, where, for indirect flights, airlines rerouted away from Middle Eastern airspace, particularly the UAE (Aa2 stable), which is poised to be the leading embarkation in 2025.
