High-Income Country Status disqualifies small developing countries from benefiting from Bretton Woods’ large scale financial assistance. Will the reclassification of Mauritius as Middle-Income Country allow the International Monetary Fund and the World Bank to accede to a request for financial assistance?
Mauritius is not a High-Income Country status anymore. The World Bank has decided to retrieve Mauritius from the High-Income Country Group, stating that “a 20.6% decline over the 2019 figure driven by a combination of the contraction in GDP and net foreign income, and the depreciation of the exchange rate”.
In 2019, Mauritius Gross National Income (GNI) exceeded the $12,535 threshold to meet the standards of the World Bank to be classified as a High-Income Country. Following the sharp contraction of the economy, the GNI of Mauritius in 2020 amounts to $10,230 making of Mauritius a Middle-Income Country once again according to standards of the World Bank.
Although this is a major blow to the country’s status and reputation, this reclassification may help Mauritian officials to negotiate for the disbursement of much needed financial assistance faster.
In Seychelles, negotiations on the sum that the archipelago will receive are ongoing between President Wavel Ramkalawan and the IMF and the World Bank. However, the country’s status as High-Income Country achieved in 2015 is delaying disbursement of funds. Although small developing islands are given a special consideration, there are number of factors that still must be assessed before the Executive Board of the IMF approves financial assistance.
Before disbursement, the IMF ensures that the applicant has what it considers as “the necessary foundation for success”. Applicants must take prior actions such as eliminating price controls and adopt budgets that are consistent with the Fund’s fiscal framework.
Is Mauritius applying for the IMF’s financial assistance like Seychelles? The Bank of Mauritius’ intervention on the domestic foreign exchange market on June 28 that depreciated the local currency by 4% and the State Trading Corporation’s July 01 increase in the price of petroleum products from Rs. 48.40 to Rs. 50.70 may be indicative of the Mauritian Government’s intent.
