On 11 September 2025, Prime Minister Narendra Modi announced a $680 million package of support for Mauritius. The funds will finance a new hospital, expand port facilities in Port Louis, and strengthen maritime surveillance in the Chagos Archipelago. Official communiqués framed the initiative as development cooperation. Strategically, it signals India’s determination to anchor Mauritius firmly within its maritime sphere at a time of intensifying rivalry with China in the Indian Ocean.

For Port Louis, the package is substantial. But it also exposes the structural dilemma of small states: strategically indispensable, yet economically brittle. The success of India’s investment will depend less on the scale of the cheque than on whether Mauritius’ institutions can transform external support into resilience.

Debt and fiscal pressure

Mauritius carries one of the highest debt burdens in its region. The IMF’s June 2025 Article IV consultation estimated gross public debt at 91.6% of GDP in 2024. Debt service consumed nearly 40% of government revenue, while the current account deficit widened to 11% of GDP. Reserves of $7 billion covered less than seven months of imports.

By comparison, Seychelles—once above 130% of GDP before restructuring—now maintains debt near 60%. Sri Lanka, after its 2022 default, remains above 110%. Mauritius is still investment grade, but sits uncomfortably between peers that have stabilised and those that faltered.

The Mauritius Investment Corporation (MIC) amplifies concerns. Seeded in 2020 with Rs 81 billion (about $1.8bn, or 17% of GDP) directly from the Bank of Mauritius, it provided corporate lifelines during the pandemic. Audited accounts have yet to be published. The IMF warns of “significant governance and contingent liability risks.”

The rupee under strain

The Mauritian rupee has lost more than 40% of its value against the dollar over the past decade, sliding from 33/USD in 2015 to 46/USD in mid-2025. Depreciation has helped sustain tourism, which accounts for roughly 25% of GDP, but raised the cost of food and fuel for households.

Mauritius imports over 70% of its food and nearly all of its energy. Inflation was officially 6.8% in 2024, but household surveys suggest effective increases of 9–10% for lower-income groups. Comparisons sharpen the point: the Seychelles rupee fell just 18% in the same period, the Kenyan shilling 25%.

Sectoral stress points

Healthcare: Mauritius has about 3 hospital beds per 1,000 inhabitants, below the OECD average of 4.7. Non-communicable diseases account for 80% of mortality. Facilities are outdated; the last major hospital opened more than 20 years ago.

Infrastructure: The Metro Express improved mobility but drew criticism for poor environmental planning. Flooding in Port Louis exposed weak drainage integration. The planned port expansion depends on procurement and oversight.

Agriculture: Fertiliser subsidies of Rs 600m annually support sugar estates, while Mauritius imports even salt and potatoes. According to FAO, food import dependence exceeds 70%.

Tourism: Visitor arrivals reached 1.8m in 2023, surpassing pre-pandemic levels. Tourism receipts stabilise the balance of payments but leave the economy vulnerable to shocks.

Education and labour: Mauritius spends around 4.5% of GDP on education, but youth unemployment remains near 20%. Skilled professionals emigrate, replaced by imported labour in construction and services. AI threatens outsourcing jobs.

Governance paradox

Mauritius ranks 2nd in Africa on the IIAG 2023 (72.8/100) and 86/100 “Free” on Freedom House. Yet TI’s CPI 2024 scored only 51/100, rank 56th globally. The BTI 2024 warned of “increasing risks from state capture.”

Climate and offshore

The World Bank projects Mauritius could lose up to 10% of GDP annually by 2050 from climate damage. Offshore finance, a key pillar, faces OECD and EU scrutiny.

Chagos and alignment

In May 2025 the UK transferred Chagos sovereignty to Mauritius, while Diego Garcia was leased to the US for 99 years (~£101m annually). India’s financing of maritime surveillance ties Mauritius closer to Indo-Pacific security frameworks.

Scenarios ahead

And India...

India’s $680m package highlights the fragility of small states: strategically vital, fiscally brittle. For India, the price secures influence. For Mauritius, it deepens alignment while leaving structural risks unresolved. Aid can purchase alignment, not resilience.