The global Coronavirus (COVID-19) outbreak has created a major worldwide economic disruption and companies and corporations are facing unprecedented challenges. In this situation, measures are being taken in order to sustain the Mauritian economy. It is in this COVID-19 pandemic context that the COVID-19 (Miscellaneous Provisions) Act 2020 (the "COVID -19 Act") with amendments to the Bank of Mauritius Act (the "BoM Act") and the Public Debt Management Act (the "PDM Act"), among other legislation, has been enacted.
With effect as from 23 March 2020, the following measures have been taken under the BoM Act to sustain this crisis:
- The Special Reserve Fund of the Bank of Mauritius can be used with the approval of the Board of the Bank of Mauritius to extend grants to government to assist it in its fiscal measures to stabilise the economy of Mauritius;
- The Bank of Mauritius will be able to invest an amount of the official foreign reserves, as the board may determine, in any corporation or company set up for the purpose of facilitating economic development;
- The portfolio of foreign exchange reserves of the Bank of Mauritius has been diversified to include financing instruments such as foreign currency denominated shares or debt securities of companies set up for the purpose of facilitating economic development;
The above measures, read together with previous actions taken since 10 March 2020 in the context of the COVID-19 pandemic by the Bank of Mauritius, such as the reduction of the repo rate, reduction of the cash reserve ratio, intervention on the domestic foreign exchange market, shows the state of urgency that Mauritius is facing, with government using its Central Bank to assist further the nation.
In addition, the PDM Act, which was enacted in 2008, with the view of primarily amending, consolidating and modernising the laws and legislative framework with regards to public loans, bonds and similar instruments and government guarantees, for a better management of the public sector debt, has been amended through the COVID-19 Act to abolish the public debt sector ceiling.
The PDM Act defines public sector debt as any debt incurred through the raising of loans, the issuing of securities, overdrafts or by any other means by government and public enterprises. Section 7 of the PDM Act sets the statutory debt ceiling for such public sector debt in relation to the island's GDP for every fiscal year, (ie, the maximum amount of debt in a given fiscal year) with the key objectives of such ceiling being to highlight the country's overall debt exposure, to monitor and control the growth of such exposure, to ensure that such debt is sustainable in the future and to impart fiscal responsibility and discipline on the government.
While it is greatly understood that the COVID-19 pandemic has brought about an unprecedented challenge for the government, it is expected that such extreme measures be exercised with caution. Also, we assume that these exceptional measures are only temporary and will last with the COVID-19 pandemic in Mauritius and that the forthcoming Budget will give more details on the Mauritian economy post-pandemic from macro and micro economic perspectives.
For a summary of recent legislative amendments introduced in Mauritius in relation to COVID-19, please click here.
Reviewed by Head of ENSafrica (Mauritius) Thierry Koenig and Martine de Fleuriot de la Coliniere, an Executive in ENSafrica (Mauritius).
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