The newly released audited accounts of the Bank of Mauritius (BoM) reveal an impairment loss of Rs 5.4 billion relating to its subsidiary, the Mauritius Investment Corporation (MIC). The financial improprieties underlying MIC's investments have now begun to adversely affect the BoM balance sheet. Valuations however remain overstated. It is therefore imperative that the Bank initiates, without further delay, an independent forensic audit of MIC carried out by a credible, neutral and international firm - both for transparency and to facilitate a phased divestment of its ownership.
Mauritius had long been regarded as one of Africa's most stable and well-governed financial centres. Strong institutions, credible regulation and conservative oversight have historically underpinned this reputation. But reputations must be protected continuously, and the 2025 Annual Report of the Bank of Mauritius highlights a series of valuation and governance concerns both in the bank standalone and group accounts - particularly around Airport Holdings Ltd (AHL) and MIC - that warrant independent clarification. These issues are of such significance that an internal review or traditional local audit alone cannot provide the level of assurance expected of a central bank operating within an international financial centre. A neutral, independent forensic assessment is now necessary to reinforce trust and uphold the standards on which Mauritius has built its financial credibility.
Other countries have taken similar steps when confronted with valuation or governance concerns surrounding public-sector owned assets. These were not signs of crisis but responsible moves to restore confidence through objective scrutiny. Lebanon offers one example: when questions arose about Banque du Liban's accounting and financial-engineering practices, the government appointed Alvarez & Marsal (A&M) to conduct a full forensic audit. Lebanon's problems were far more severe than anything Mauritius faces, but the principle remains relevant - when numbers become unclear, especially in underdeveloped capital markets, independent verification becomes the only credible solution.
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Ireland provides a more comparable precedent. Following the 2008 financial crisis, the Central Bank of Ireland retained independent firms, including A&M, to perform loanbook reviews, asset-quality assessments and governance diagnostics. These exercises were not driven by insolvency but by the need for accurate valuations and transparency during the restructuring of Ireland's banking sector. The independent reports were instrumental in restoring credibility with markets and taxpayers. Cyprus took similar measures after the 2013 bail-in of Laiki Bank and the rescue of Bank of Cyprus. Faced with uncertainty over asset values, related-party exposures and supervisory weaknesses, the authorities engaged A&M and BlackRock Solutions to conduct forensic examinations of loan books, liquidity flows and governance failures. Cyprus was not insolvent as a sovereign, but the opacity surrounding key institutions made independent assessment essential.
Independent specialists
Iceland offers yet another instructive case. After its banking system collapsed in 2008, the Central Bank of Iceland and other authorities hired forensic specialists - including A&M and Kroll - to reconstruct balance sheets, investigate relatedparty lending, trace asset transfers and determine the true condition of the financial system. Even though Iceland's crisis was extreme, the principle it established -relying on external valuation and forensic analysis when faced with opaque exposures - has since become standard practice across central banks.
Across these examples, a clear pattern emerges: when valuation assumptions are stretched and governance signals appear, governments and central banks turn to independent specialists to re-establish clarity. Mauritius now faces a similar moment with MIC - not because of imminent crisis, but because prudence and credibility demand transparent verification.
A fundamental design flaw is that MIC is 100% owned by the Bank of Mauritius and therefore fully consolidated into the central bank's balance sheet. This is highly unusual by international standards. In all comparable jurisdictions, bailout or restructuring vehicles are created as insolvency-remote, off-balancesheet structures - typically owned by the Ministry of Finance, a sovereign holding company or an independent resolution authority.The purpose is to ring-fence risky assets, prevent contamination of the central bank's balance sheet and preserve monetary-policy credibility. Ireland's NAMA, Iceland's resolution vehicles and Cyprus's post-crisis assetmanagement structures were all set up in this way. MIC, by contrast, was embedded directly inside the central bank, which is now forcing BoM to absorb valuation losses, consolidate distressed assets and manage commercial exposures far outside its mandate. This design failure makes an independent forensic review even more essential.
The largest contributor to MIC's losses at the group level is AHL, a state-owned group that includes Air Mauritius. MIC became a 49% shareholder in AHL as part of a bailout, based on a valuation inflated by fictitious goodwill. The Prime Minister stated in Parliament on 15 April 2025 that "AHL was set up comprising 23 entities, including Air Mauritius Ltd. The actual net assets were valued at Rs 10 billion. However, a goodwill amount of Rs 41 billion was added... MIC was instructed to buy 49% of AHL at Rs 51 billion. MIC paid Rs 25 billion... This is a case of excessive overvaluation at the expense of MIC".
Despite generating Rs 38.9 billion in revenue in 2025, AHL posted a net loss of Rs 8.8 billion. Its book equity stands near Rs 39.5 billion, yet standard infrastructure-valuation approaches - discounted-cash-flow analysis, regulated-asset-base modelling and distressed EV/ EBITDA multiples - produce a far more realistic valuation closer to Rs 18 billion, with a downside of Rs 10-13 billion. This implies that book equity is overstated by more than half. MIC's 49% interest, carried at Rs 19 billion, is more plausibly worth between Rs 6 billion and Rs 9 billion. A valuation gap of this magnitude reinforces the need for external verification. It is perplexing that MIC relied on unaudited financial information rather than commissioning an independent valuation. Just on the basis of Note 40 of BoM's audited accounts, an independent forensic review should have already been initiated.
Commitment to transparency
MIC's other valuation weaknesses are equally serious. The corporation recorded a Rs 3.7 billion fair-value loss on distressed convertible instruments, whose structure offers almost no equity upside: issuers can redeem early, and MIC cannot force conversion. MIC therefore bears the full downside credit risk with- out receiving appropriate compensation. These instruments are not economically "convertibles" but deeply subordinated distressed debt and should have been priced accordingly but were not. Their weak performance is structural rather than cyclical and investment decisioning processes that led to such lopsided structuring should be audited forensically.
Further uncertainty lies in MIC's land valuations. The corporation holds Rs 9.175 billion in investment property valued using discount rates as low as 7%. For a small, illiq- uid island market with concentrated ownership and long exit horizons, such a discount rate is difficult to justify. Comparable emerging markets use rates of 10-18%. Even modest adjustments would materially reduce valuations and trigger additional impairments. Notably, none of the land has yet been sold at or near its carried-on paper values, for the market to corroborate these assumptions. In Cyprus and Iceland, optimistic property valuations were among the first issues corrected by independent forensic reviewers.
All of this places the central bank in a conflicted position: BoM acts simultaneously as regulator, investor, consolidator of losses, reviewer of valuations and the institution respon- sible for reporting results. Traditional audits simply will not do. No central bank is designed to perform all of these roles, particularly when dealing with exposures far outside its mandate. In Ireland, the clear separation of supervisory, resolution and valuation functions was essential to restoring credibility; in Cyprus and Iceland, independent forensic assessments played the same role.
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BoM's net profit amounted to only Rs 1.6 billion in 2024-25 and could easily turn negative should MIC impairments rise further which would certainly result from such an audit. The central bank must now free itself from MIC - a structurally toxic vehicle reflecting years of misallocation. Several MIC-financed companies are now declaring insolvency. Under the leadership of the new Governor, the Bank must demonstrate that it will no longer be subject to political influence, especially when its most overvalued assets are majority state owned. Following an independent forensic audit and valuation exercise, BoM should seek to exit MIC with the support of an internationally recognised restructuring firm. Although the Annual Report remains interestingly silent on Silver Bank, currently under conservatorship, a similar approach is urgently required.
An independent forensic review of MIC would reaffirm Mauritius's commitment to transparency and ensure the country continues to meet the standards expected of a respected international financial centre. Central banks as regulators set standards including proper valuation standards. They lead by example. Ireland, Cyprus and Iceland benefited from similar reviews not always because of crisis, but because independent assessments restored clarity and credibility. Mauritius now has the opportunity to take the same responsible path while its financial system still remains stable and manageable. The country's success has been built on trust. A clear, neutral assessment of its major public-sector investments would protect that trust and strengthen Mauritius's financial foundations for years to come.
