Press Release: Statement at the Conclusion of the 2011 Article IV Consultation Mission to Mauritius

IMF News, February 2, 2011

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Canonical URL: Press Release: Statement at the Conclusion of the 2011 Article IV Consultation Mission to Mauritius

Press Release No. 11/25; February 2, 2011.
An International Monetary Fund (IMF) mission led by Martin Petri visited Port Louis during January 19–February 2, 2011 to conduct the discussions for the Article IV consultation with Mauritius.
The mission met with The Honorable Vice Prime Minister and Minister of Finance and Economic Development Pravind Jugnauth, Governor of the Bank of Mauritius Rundheersing Bheenick, other senior government officials, as well as representatives of the National Assembly, the private sector, and civil society.

Finding: “The Mauritian economy has performed better than expected with real growth at market prices increasing to 4 percent in 2010.”
Attribution for performance: authorities’ prompt and comprehensive policy response to the global crisis over 2008–10.
Projection: “Taking account of the expected upturn in the world economy and the continuing effects of the fiscal stimulus, economic growth is projected to increase to somewhat more than 4 percent in 2011.”
Policy challenge: accelerate growth through increased public and private investment and productivity advances while continuing medium-term fiscal consolidation to reduce economic vulnerabilities.

Finding: “The recent increase in inflation is mainly due to one-time exogenous factors that should not result in sustained inflationary pressures with the appropriate monetary policy response.”
Expectation: “Year-on-year inflation in 2011 is expected to be 5½ percent.”
Assessment: “At this juncture, the monetary policy stance appears broadly appropriate, but more efforts could be made to remove excess liquidity.”
Recommendation: Coordination between Bank of Mauritius (BOM) policies and the government’s financing should contribute to a smooth operation of the money and debt markets.
Financial sector: “The banking sector appears robust, and the financial system has proved resilient.”

Budget intent: “With the 2011 budget, the government intends to set Mauritius on a strong growth trajectory.”
Projection: Compared to 2010, the overall fiscal balance including net lending is projected to increase mainly on account of capital investment net lending to public enterprises, and spending from special funds.
Implementation risk: “Implementation constraints could result in lower than intended spending.”
Mission recommendations:
- Careful execution of capital spending, given a “small output gap estimated for Mauritius in 2011.”
- Tight financial controls on public enterprise loans.
- Save unexpected revenues to limit the increase in the fiscal deficit.
- Adopt a well designed and predictable tax policy to support medium-term fiscal consolidation and growth.

Recognition: “Mauritius is a pioneer in the development of green taxes.”
Further action: “More can be done, not least regarding increasing road congestion.”
Specific policy options: fine-tuning of vehicle taxation to increase incentives to reduce emissions and congestion; consideration that “An explicit carbon tax could replace a similarly structured tax to improve climate policy.”

Welcome: “The mission welcomes the structural reforms in recent years, which have contributed to raising Mauritius’ competitiveness.”
Continued priorities: maintain reform momentum to reduce critical structural bottlenecks in infrastructure and the parastatal sector; support export-oriented SMEs launching new products and services.
Objective: further strengthen Mauritius’ ability to compete in the world economy, including as an international financial center.

Offer: “The IMF stands ready to assist the authorities in the implementation of their economic program, including through the provision of technical assistance.”
Outlook: The IMF “looks forward to continued fruitful policy dialogue in the period ahead.”

Source: IMF Press Release No. 11/25 — Statement at the Conclusion of the 2011 Article IV Consultation Mission to Mauritius (February 2, 2011).