(Bloomberg) --

The World Bank urged Mauritius to reinstate an upper limit on its debt to help rein in the Indian Ocean island nation’s budget deficit and ease pressure on its finances, after abandoning it almost two years ago.   

While the suspension of the 60% debt-to-gross domestic product ratio cap was appropriate early in the coronavirus pandemic to allow for urgently needed spending in the face of sharply declining fiscal revenues, it should now be restored, said Idah Pswarayi-Riddihough, the World Bank’s country director for Mauritius.

The public sector debt-to-GDP ratio estimated at 65% as at June 30, 2019 ballooned to 94.3% at the end of September, according to Finance Ministry data. That’s as the tourism-dependent nation increased its debt to shore up an economy suffering from its worst contraction in four decades due to the fallout from the pandemic. 

The government should now focus on more affordable spending patterns and high priority areas, Pswarayi-Riddihough, said in an emailed response to questions Tuesday. 

Pswarayi-Riddihough’s comments come after she met with government officials last week for the first time since being appointed country director in July 2020, during which they discussed the nation’s debt position.

According to a statement from the Finance Ministry it is targeting a debt-to-GDP ratio of below 80% by end-June 2025.

With the reopening of borders to vaccinated tourists in July and the easing of travel restrictions across the world, the lender expects economic growth to accelerate to about 6.5% this year, Pswarayi-Riddihough said. The nation’s statistics agency estimates the economy grew 4.8% in 2021. 

However, real GDP “will likely not return to its pre-pandemic levels until at least 2024,” she said.

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