IMF Executive Board Concludes 2019 Article IV Consultation with Mauritius
April 23, 2019
On April 22, 2019,the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation 1 with Mauritius.
The Mauritian economy continues to grow at a steady pace, benefiting from a vibrant services sector and strong domestic demand. Real GDP expanded by 3.8 percent in 2017 and is estimated to have grown at a similar rate in 2018. Inflationary pressures are contained, and the unemployment rate has fallen to about 6.9 percent. The external balance continues to deteriorate due to a rising trade deficit in goods, but the overall balance of payments remains in surplus. International reserves have improved significantly since 2016, supported by continued financial inflows. Monetary policy remains accommodative, while the fiscal stance continues to be expansionary.
A prudent stance by financial services firms and supervisory agencies has helped to maintain financial stability. Activity in the offshore global business sector has been broadly resilient while reforms to the sector are underway. Notable efforts are being pursued to meet the international anti-tax avoidance initiatives and to strengthen the AML/CFT framework in line with the Financial Action Task Force (FATF) recommendations, though further reforms are needed to fully meet them.
Going forward, the growth momentum is expected to continue. Real GDP growth is projected at about 4 percent in the medium term. Without fiscal consolidation, the authorities’ debt target of 60 percent of GDP by FY2020/21 is unlikely to be met. Rather, public debt is projected to stay elevated over the forecast horizon, with the debt outlook being susceptible to a range of macro-fiscal shocks. As the revised tax treaty with India comes into effect, the global business sector is entering a transition phase, with efforts underway to move into high-value added services and tap into other markets, notably in the region.
Executive Board Assessment 2
Executive Directors welcomed Mauritius’ steady economic growth momentum and broadly positive macroeconomic outlook. Noting the rising fiscal and external sector vulnerabilities, Directors encouraged the authorities to pursue prudent policies to strengthen macroeconomic and financial resilience and to continue reforms to boost productivity and competitiveness.
Directors underscored the need for fiscal adjustment to enhance fiscal credibility, preserve debt sustainability, and reduce the external imbalance. Given the public investment needs, the authorities’ debt target of 60 percent of GDP for FY2020/21 is unlikely to be met without a significant policy adjustment. While the authorities are considering extending the target by two years, Directors urged a gradual fiscal consolidation beginning with the next budget for FY2019/20 to enhance fiscal credibility and to put public debt on a declining path.
Directors agreed that the monetary policy stance is broadly appropriate at the current juncture. They encouraged the authorities to continue their efforts to contain excess liquidity in the banking system. Further modernizing the monetary policy framework by building the necessary capacity to announce and track a medium‑term inflation objective would help to enhance policy credibility and improve resilience to shocks.
Directors highlighted the widening external imbalance. While international reserves have improved significantly on the back of strong financial inflows, given the large size of the offshore sector, Directors agreed that the foreign exchange intervention policy should continue to build reserves buffers as conditions permit, to strengthen resilience to shocks.
Directors appreciated the authorities’ efforts to bolster competitiveness by introducing effective and efficient initiatives to improve the business climate, build innovation capacity, reduce the skill mismatch, and increase female workforce participation. Maintaining strong and independent institutions is essential to ensure the country remains an attractive investment and employment destination.
Directors stressed the importance of implementing the outstanding FSAP recommendations for further strengthening financial stability. They also welcomed the steps taken to comply with the international anti‑tax avoidance initiatives and the efforts to strengthen the AML/CFT framework. In this context, they underscored the need to expeditiously implement the remaining recommendations of the Eastern and Southern African Anti Money Laundering Group (ESAAMLG). Directors also encouraged the authorities to continue to improve data quality.
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Table 1. Mauritius: Selected Economic and Financial Indicators, 2015–24 |
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2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
2024 |
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|
Est. |
Budget |
Est. |
Proj. |
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(Annual percent change, unless otherwise indicated) |
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|
National income, prices and employment |
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|
Real GDP |
3.6 |
3.8 |
3.8 |
3.8 |
3.9 |
3.9 |
4.0 |
4.0 |
4.0 |
4.0 |
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|
Real GDP per capita |
3.4 |
3.8 |
3.7 |
3.7 |
3.8 |
3.9 |
4.0 |
4.0 |
4.0 |
4.0 |
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|
GDP per capita (in U.S. dollars) |
9,259 |
9,681 |
10,491 |
11,281 |
11,694 |
12,433 |
13,226 |
14,097 |
14,947 |
15,835 |
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|
GDP deflator |
1.0 |
2.1 |
1.4 |
2.2 |
2.6 |
3.0 |
3.0 |
2.9 |
2.5 |
2.4 |
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|
Consumer prices (period average) |
1.3 |
1.0 |
3.7 |
3.2 |
2.1 |
3.7 |
3.5 |
3.4 |
3.4 |
3.4 |
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Consumer prices (end of period) |
1.3 |
2.3 |
4.3 |
1.8 |
4.1 |
3.6 |
3.5 |
3.4 |
3.4 |
3.4 |
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Unemployment rate (percent) |
7.9 |
7.3 |
7.1 |
6.9 |
6.9 |
6.9 |
6.8 |
6.8 |
6.8 |
6.7 |
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|
(Annual percent change, in US Dollars) |
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External sector |
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Exports of goods and services, f.o.b. |
-10.1 |
-3.5 |
3.9 |
5.9 |
3.8 |
5.0 |
5.5 |
5.7 |
5.7 |
5.7 |
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Of which : tourism receipts |
-1.0 |
9.8 |
11.2 |
7.2 |
7.7 |
7.9 |
7.9 |
7.9 |
7.8 |
0.0 |
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|
Imports of goods and services, f.o.b. |
-12.2 |
-1.7 |
11.4 |
6.8 |
6.2 |
3.2 |
2.5 |
2.5 |
2.6 |
2.6 |
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|
Nominal effective exchange rate (annual average) |
-1.0 |
1.8 |
2.5 |
0.3 |
... |
... |
... |
... |
... |
... |
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|
Real effective exchange rate (annual average) |
-1.0 |
1.2 |
3.9 |
1.3 |
... |
... |
... |
... |
... |
... |
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|
Terms of trade |
8.7 |
1.9 |
-4.1 |
-4.4 |
2.1 |
0.1 |
0.4 |
0.3 |
0.1 |
0.1 |
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(Annual change in percent) |
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Money and credit |
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|
Net foreign assets |
15.6 |
3.8 |
3.2 |
0.7 |
4.3 |
5.3 |
6.0 |
6.3 |
6.5 |
7.6 |
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Net claims on government |
-6.2 |
29.1 |
28.5 |
8.1 |
8.3 |
6.8 |
6.2 |
5.7 |
5.2 |
5.3 |
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Credit to non-government sector |
7.9 |
-0.8 |
4.1 |
6.1 |
5.4 |
5.8 |
6.0 |
6.1 |
6.1 |
6.1 |
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Broad money |
7.8 |
8.7 |
8.7 |
2.1 |
6.6 |
7.0 |
7.1 |
7.0 |
6.6 |
6.5 |
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Income velocity of broad money (M2) |
1.1 |
1.1 |
1.1 |
1.1 |
1.1 |
1.1 |
1.1 |
1.1 |
1.1 |
1.1 |
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Interest rate (weighted average TBs, primary auctions) |
1.9 |
2.5 |
2.1 |
... |
... |
... |
... |
... |
... |
... |
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(Percent of GDP, unless otherwise indicated) |
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Central government finances 1,2 |
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Overall consolidated balance (including grants) |
-3.7 |
-3.3 |
-2.9 |
-3.3 |
-3.0 |
-3.0 |
-2.9 |
-2.9 |
-2.9 |
-2.8 |
-2.8 |
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Primary balance (excluding grants) |
-1.4 |
-1.5 |
-1.0 |
-2.9 |
-1.8 |
-1.8 |
-1.6 |
-1.6 |
-1.6 |
-1.6 |
-1.6 |
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Revenues (incl. grants) |
20.8 |
21.1 |
21.4 |
23.3 |
22.4 |
22.1 |
22.0 |
21.7 |
21.6 |
21.5 |
21.5 |
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Expenditure, excl. net lending |
24.5 |
24.4 |
24.3 |
27.1 |
25.4 |
25.1 |
24.9 |
24.6 |
24.5 |
24.2 |
24.2 |
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Domestic debt of central government |
46.9 |
49.2 |
47.9 |
49.4 |
48.5 |
48.6 |
48.2 |
47.5 |
46.8 |
46.1 |
45.3 |
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External debt of central government |
12.7 |
10.4 |
9.4 |
8.6 |
9.5 |
9.4 |
9.2 |
9.2 |
9.4 |
9.6 |
9.6 |
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Investment and saving 4 |
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|
Gross domestic investment |
18.1 |
17.9 |
18.3 |
18.4 |
21.1 |
22.0 |
21.2 |
20.3 |
20.4 |
20.9 |
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|
Public |
4.7 |
4.4 |
4.1 |
4.7 |
7.0 |
7.6 |
6.6 |
5.4 |
5.3 |
5.3 |
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|
Private 2 |
13.4 |
13.5 |
14.1 |
13.6 |
14.1 |
14.4 |
14.6 |
14.9 |
15.1 |
15.6 |
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|
Gross national savings |
16.8 |
17.3 |
17.9 |
16.8 |
17.1 |
16.9 |
15.6 |
15.5 |
15.4 |
16.3 |
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|
Public |
-1.8 |
-2.1 |
-1.4 |
-0.7 |
-0.8 |
-1.0 |
-1.2 |
-1.4 |
-1.4 |
-1.3 |
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|
Private |
18.6 |
19.4 |
19.3 |
17.6 |
17.9 |
17.9 |
16.8 |
16.8 |
16.9 |
17.6 |
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|
External sector |
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|
Balance of goods and services |
-10.0 |
-10.3 |
-13.5 |
-13.7 |
-15.0 |
-13.8 |
-12.2 |
-10.5 |
-9.1 |
-7.6 |
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Exports of goods and services, f.o.b. |
46.1 |
42.5 |
40.7 |
40.1 |
40.1 |
39.6 |
39.3 |
39.0 |
38.9 |
38.8 |
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|
Imports of goods and services, f.o.b. |
-56.2 |
-52.8 |
-54.2 |
-53.8 |
-55.1 |
-53.5 |
-51.5 |
-49.5 |
-47.9 |
-46.4 |
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|
Current account balance |
-3.6 |
-4.0 |
-5.6 |
-6.2 |
-7.4 |
-6.7 |
-5.7 |
-5.5 |
-5.3 |
-5.0 |
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|
Capital and financial account |
9.3 |
10.9 |
10.8 |
8.7 |
8.0 |
7.5 |
6.9 |
6.8 |
6.3 |
6.8 |
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Overall balance |
4.9 |
6.0 |
6.2 |
2.5 |
0.6 |
0.8 |
1.2 |
1.3 |
1.1 |
1.8 |
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|
Total external debt |
90.3 |
86.6 |
77.0 |
78.5 |
83.0 |
82.9 |
81.6 |
80.4 |
79.7 |
78.9 |
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Gross international reserves (millions of U.S. dollars) |
4,222 |
4,934 |
5,974 |
6,329.9 |
6,423 |
6,552 |
6,754 |
6,978 |
7,178 |
7,534 |
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|
Months of imports of goods and services, f.o.b. |
7.8 |
8.2 |
9.3 |
9.3 |
9.2 |
9.1 |
9.2 |
9.2 |
9.3 |
9.3 |
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Memorandum items: |
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|
GDP at current market prices (billions of Mauritian rupees) |
409.9 |
434.8 |
457.5 |
485.2 |
517.0 |
553.5 |
592.9 |
634.6 |
676.6 |
720.6 |
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|
GDP at current market prices (millions of U.S. dollars) |
11,692 |
12,232 |
13,267 |
14,277 |
14,812 |
15,757 |
16,757 |
17,856 |
18,929 |
20,051 |
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|
Public sector debt, fiscal year (percent of GDP) |
66.9 |
65.0 |
63.7 |
64.9 |
67.5 |
67.8 |
66.7 |
65.5 |
64.4 |
63.3 |
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|
Public sector debt, calendar year (percent of GDP) |
63.6 |
64.4 |
63.7 |
65.1 |
… |
… |
… |
… |
… |
… |
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Foreign and local currency long-term debt rating (Moody's) |
Baa1 |
Baa1 |
Baa1 |
… |
… |
… |
… |
… |
… |
… |
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Sources: Mauritian authorities; and IMF staff estimates and projections. |
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1 GFSM 2001 concept of net lending/net borrowing, includes special and other extrabudgetary funds. Fiscal data reported for fiscal years (e.g, 2018=2018/19). |
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2 Includes changes in inventories. |
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1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
2 At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm .
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