Port Louis, Mauritius – Household debt in Mauritius is on a concerning trajectory, according to the Bank of Mauritius’s Financial Stability Report released in June 2025. While not currently posing an immediate systemic risk, indicators suggest a gradual weakening of household financial positions, compounded by tighter budgetary conditions, rising interest rates, and persistent pressure on property prices.
As of June 2025, household debt reached 39.2% of GDP, a significant increase from levels recorded in previous years. When measured as a percentage of household income, debt now stands at 109.5%, a key threshold indicating a growing reliance on credit to finance consumption and residential investment. The total outstanding household debt is estimated at Rs 281.1 billion. The central bank noted that an acceleration observed in the second quarter of 2025 was partially driven by anticipatory behavior, with households increasing borrowing ahead of the implementation of less favorable fiscal measures.
This increase in indebtedness is beginning to impact debt service capacity. The combined effect of higher borrowing volumes and a 50 basis point increase in the key policy rate in February 2025 has led to increased debt servicing costs for households. In June 2025, debt service represented 17.9% of household income, and 6.4% of GDP. The Bank of Mauritius emphasizes that these levels remain broadly in line with those observed before the monetary easing phase of 2024, but the signal is clear: a growing portion of household income is now allocated to debt repayment, potentially curtailing consumption and savings.
The report also highlights a noteworthy trend in household financial behavior regarding exchange rate risk. Deposits held in foreign currencies by households continued to grow rapidly in the first half of 2025, reaching USD 1.9 billion, representing 15.4% of total deposits, compared to 9.5% in 2019. These foreign currency deposits are growing at an average annual rate of 20.9%, significantly faster than rupee-denominated deposits. This reflects a desire to preserve wealth and hedge against a perceived risk of currency depreciation, although the report notes that the Mauritian rupee has not experienced a continuous depreciation against the US dollar.
Notably, the increase in foreign currency deposits exceeds purchases of foreign currency on the domestic market, suggesting repatriation of assets held abroad or reallocation of existing foreign holdings. This behavior indicates a level of concern among households regarding the future stability of the Mauritian rupee.
The Bank of Mauritius assesses that the combined effect of higher debt levels, rising financing costs, and increasing property prices is creating affordability and sustainability challenges, particularly for low-income and highly indebted households. In a scenario of moderate growth and fiscal consolidation, the financial headroom for households could be further reduced.
The overall message from the Financial Stability Report is nuanced but firm: Mauritius is not facing an imminent household debt crisis, but imbalances are accumulating gradually. Ignoring these signals could underestimate the potential social and macro-financial risks that could emerge if income growth does not keep pace, or if a shock to interest rates or economic activity were to test household resilience.
The Mauritian economy experienced GDP growth of 4.7% in 2024, primarily driven by tourism, construction, and the financial sector, according to Statistics Mauritius. This growth, while positive, occurs against a backdrop of increasing household indebtedness, creating a complex economic picture.
Governor of the Bank of Mauritius, Harvesh Seegolam, stated in April 2024 that risks from the banking sector have fallen considerably, supported by strong capital and liquidity buffers. However, the report’s focus on household debt suggests that vulnerabilities remain within the broader financial system. The IMF, following its 2024 Article IV Consultations, noted that the prompt deployment of pre-pandemic buffers helped the Mauritian economy rebound strongly and that growth prospects remain favorable. Moody’s maintained the country’s Baa3 credit rating with a stable outlook in January 2024, citing favorable fiscal and debt metrics and sizeable foreign reserves as key supporting factors. The Economist Intelligence Unit also offered an optimistic outlook, expecting continued buoyant growth in the near term and a downward trend in inflation.
The interplay between positive economic indicators and rising household debt presents a challenge for policymakers. While the Mauritian economy has demonstrated resilience in the face of recent shocks, the increasing financial strain on households warrants close monitoring and proactive measures to mitigate potential risks. The Bank of Mauritius’s report serves as a crucial warning, urging vigilance and a balanced approach to economic management.
