Press Release No. 12/23

Press Release No. 12/23
January 25, 2012

An International Monetary Fund (IMF) mission led by Martin Petri visited Port Louis during January 11–25, 2012 to conduct the discussions for the Article IV consultation with Mauritius. The mission met with The Honorable Prime Minister Dr. Navinchandra Ramgoolam, The Honorable Vice Prime Minister and Minister of Finance and Economic Development Xavier-Luc Duval, 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.

At the conclusion of the visit, Mr. Petri issued the following statement today in Port Louis:

“The Mauritian economy has performed reasonably well in 2011 with real growth at market prices estimated at 4.1 percent. This reflects in part the authorities’ long record of prudent macroeconomic policies and their comprehensive policy response to the ongoing global crisis. The challenge for 2012 and beyond will be to maintain growth through increased public and private investment and productivity advances, while continuing medium-term fiscal consolidation to reduce economic vulnerabilities. Taking account of the slowdown in the world economy and a moderately expansionary fiscal stance, economic growth is projected to decline moderately to somewhat less than 4 percent in 2012.

“The recent developments in inflation are mainly due to administered prices and one-time exogenous factors that should not result in sustained inflationary pressures with the appropriate monetary policy response and wage restraint. Year-on-year inflation in 2012 is expected to be 5 percent. The monetary policy stance appears broadly appropriate at this time with future rate adjustments depending on economic developments. The Bank of Mauritius (BOM) had to remove excess liquidity from the market during 2011 with negative effects on its income position, a situation likely to persist in 2012 and that is necessary from a macroeconomic perspective. Coordination between BOM policies and the government’s financing strategy should contribute to a smooth operation of the money and debt markets. The banking sector appears robust, and the financial system has proved resilient.

“With the 2012 budget, the government intends to keep Mauritius on a sustained growth path. Compared to 2011, the overall fiscal deficit is projected to increase mainly on account of capital investment and spending from special funds. Implementation constraints could result in lower than intended spending as happened during 2011. With a small output gap estimated for Mauritius in 2012, the mission recommends a cautiously expansionary fiscal stance with careful execution of capital spending, tight financial controls on public enterprise finances, and improvements in the targeting of social benefits. The authorities’ medium-term fiscal consolidation plans are welcome to reduce fiscal and external vulnerabilities.

“Structural reforms implemented steadily over the years have contributed to raising Mauritius’ competitiveness, but more can be done to raise standards of living further. Maintaining the reform momentum to (i) reduce critical structural bottlenecks in infrastructure; (ii) build human capital through education; (iii) improve the targeting of social benefits; and (iv) to reform the parastatal sector will further strengthen Mauritius’ ability to compete in the world economy, including as an international financial and services center.

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