National debt rises Rs 20 billion even as economy slows
National debt stood at Rs 219.9 billion at end 2013, representing 60% of the GDP, while per capita debt amounted to Rs 170,000 in December 2013, compared to Rs 155,000 in 2012. (Image: IHEML)
Even as the Mauritian economy posted a lower GDP growth of 3.2% in 2013 compared to 3.4% achieved in 2012, the level of national debt has shown a worrying trend, growing by Rs 20 billion in 2013.
Poised on the eve of the next Monetary Policy Committee meeting of the Bank of Mauritius and following on the heels of the economic review by the International Monetary Fund (IMF), the latest statistics on national debt give pause for thought indeed.
National debt stood at Rs 219.9 billion at end 2013, representing 60% of the GDP, while per capita debt amounted to Rs 170,000 in December 2013, compared to Rs 155,000 in 2012.
Meanwhile, the problem of excess liquidity continues to worsen, hitting a record level of Rs 11.08 billion on January 23.
The initiatives of the Bank of Mauritius to solve the problem appear to have been almost in vain, where the last significant step was an increase in cash reserve ratio by the central bank in October 2013 from 7% to 8%.
Further, regarding refocussing sectoral credit away from Mauritius tourism and construction, the path to credit diversification appears to be strewn with difficulties.
Details of the distribution of bank credit as on January 23 confirm that the banking sector continues to be vulnerable to the fate of the construction sector. The sector as a whole owes debts of Rs 75 billion to banks across the island economy, an increase of Rs 8 billion compared to the corresponding period last year.
Political and economic observers expect a clash between the Bank of Mauritius and the Ministry of Finance as an increase in the repo rate, currently at 4.65%, is likely to feature large on Central Bank Governor Rundheersing Bheenick’s agenda while the Finance Ministry is expected to try again to plead the cause of an acceleration in economic reforms.
Besides the rise in national debt, the increased dependence on foreign sources is also another cause of concern. Foreign debts contracted by the central government total Rs 47.03 billion as at end-2013, representing a rise of over Rs 11 billion in one year and amounting to 12.8% of the GDP. The external debt is divided as follow: Rs 42.1 billion in medium and long-term bonds and Rs 4.5 billion in long term bonds.
On the other hand, debt contracted on the local markets by central government totaled Rs 149.9 billion, representing an increase of 9 billion over end-2012. A little under Rs 80 billion is in the form of five-year government bonds, Mauritius Development Loan Stocks (MDLS)/long term government bonds and tax reserve certificates. Loans of Rs 43.2 billion have been taken on medium-term through issuance of treasury notes and under the PRB Saving Scheme, and Rs 27.5 billion on a short-term basis.