London: Mauritius is confident it will get a ratings upgrade from Moody's in the next few months, its finance minister says, arguing that the island nation is diversifying its economy to reduce its reliance on European markets. The Indian Ocean island is rated Baa2 by Moody's, which placed the country's foreign and local currency government bond ratings on review in March for possible upgrade, citing the economy's resilience to shocks, diversification of the economic base and the government's progress in reducing its debt-servicing burden.
Mauritius is not rated by Fitch or Standard & Poor's.
"Our fundamentals are very good," Xavier-Luc Duval, vice prime minister and minister of finance and economic development, told Reuters on the sidelines of a private equity conference in London late last week. "It's a question really of showing how resilient we are to the turbulence in Europe and that will be the major factor. We're quite confident."
The government forecasts economic growth of just under 4 percent this year, after a 4.1 percent expansion in 2011, and is looking to markets such as China, India and South Africa as turmoil in Europe threatens its export sector, Duval said.
"We're still expecting a growth rate of between 3.6 to 3.9 percent this year," he said. "Sixty five percent of our export earnings come from Europe. Any turbulence in Europe actually affects our country and we're actively rebalancing our exports towards new markets - China for tourism, South Africa for textiles."
A higher credit rating would benefit the country's banks which might be looking to issue debt, though Mauritius itself was not planning to raise money on the external debt market, Duval said. Mauritius has never issued bonds internationally. "It's healthy for the local financial institutions which may be raising money," he said. "Generally, it reflects the stability of the economy."
Duval said the ratings upgrade would depend on how well Mauritius weathered the euro zone crisis but added the country had solid fundamentals, including a budget deficit of around 3.5 percent of gross domestic product and a debt-to-GDP ratio of 54 percent.
He said the economy was highly diversified, with manufacturing accounting for 18 percent of GDP, financial services representing 10 percent and tourism 8 percent. Other fast-growing sectors included information and communications technology and the property sector for high net worth individuals.
"All this makes for a country that is highly resilient," Duval said.
Mauritius markets itself as a bridge between Africa and Asia.
Duval said the island was also extending its double taxation agreements with African countries. It had signed 13 such accords so far, including with Kenya and Gabon, and was preparing to sign one with Nigeria.
"We're widening our double taxation and bilateral investment treaties," he said. "We're doing that very actively ... What we're trying to achieve is to be as attractive a platform for investment into Africa as possible."
Foreign direct investment in Mauritius rose by 15.5 percent in the first three months of 2012 from a year earlier to 1.598 billion Mauritius rupees, the central bank said this month.
The inflows, mainly directed towards the real estate and construction sectors, marked a rebound after a 32.2 percent drop last year. "I think we're starting to get it right," Duval said. "Even with this turmoil we're doing better than last year."
© Thomson Reuters 2012. All rights reserved.