IMF Staff Completes 2021 Article IV Mission to Mauritius

IMF News, May 7, 2021

Source details

Press Release No. 21/125
Mission leader: Cemile Sancak
Virtual visit conducted during April 19-May 7, 2021 to conduct discussions for the 2021 Article IV consultations.
Statement issued in Washington on May 7, 2021.

Mauritius has been successful in containing the Covid-19 pandemic so far thanks to strict health measures.
Key public health actions taken:
- Strict nationwide lockdown during March-May 2020.
- Closure of the border until early October 2020.
- Extensive testing, robust contact tracing, and strict isolation of suspected and confirmed cases.
- Mask requirements in all public places.
- As border restrictions were eased: comprehensive testing of arrivals and strict quarantine requirements.
- An outbreak led to a second lockdown in March 2021 that was shorter in duration and more flexible than the previous year.
- Vaccinations began in February 2021 with the authorities targeting vaccinating 60 percent of the population by July 2021.

The pandemic has seriously impacted the economy due to the sharp decline in tourism.
Contraction: real GDP contracted by nearly 15 percent in 2020.
IMF staff projection: growth to be about 5 percent in 2021, assuming some recovery in tourism.
Uncertainty: tourism flows remain uncertain and depend on the propensity to travel as the pandemic recedes and conditions in other countries.
Key short-term policy stance: accommodative fiscal and monetary stances are appropriate during the reopening phase.

The mission supported the authorities’ overall fiscal policy response, noting a large and comprehensive set of stimulus measures implemented to mitigate the pandemic’s impact, including a wage subsidy and income support for the self-employed.
Recommendations:
- Continue the accommodative fiscal stance during the reopening phase with prioritized and targeted expenditures to set the stage for resilient growth.
- Prioritize programs consistent with medium-term development needs and broader social and environmental goals, such as digitalization, inclusion, and climate change mitigation during the recovery phase.
- Prepare plans for fiscal consolidation to stabilize debt in the medium term once Mauritius has firmly emerged from the pandemic to preserve fiscal sustainability and build buffers.
Public debt outlook: substantial increase in public debt level, which is likely to exceed 90 percent of GDP in the wake of the crisis.

The mission supported the monetary policy response and advised the central bank to maintain accommodative monetary policy in the near term.
Recommendations for strengthening monetary policy:
- Strengthen the monetary policy lever in anticipation of the waning of the crisis.
- Phase in mechanisms to further support the central bank’s credibility and solidify an effective monetary policy as the economy recovers to a normal level of capacity utilization and the need for monetary policy normalization becomes apparent.
- The central bank law is being reformed, including to preempt further exceptional transfers to the government, in line with international best practices.
- The central bank should relinquish ownership of the Mauritius Investment Corporation (MIC), and financing of the MIC should be provided through the budgetary process.

During the recovery phase, authorities should prioritize support measures to further improve competitiveness, enhance diversification, and accelerate long-term structural transformation to make Mauritius a sustainable and resilient economy built on education and technology.
The mission welcomed the authorities’ concerted efforts to exit from the Financial Action Task Force (FATF) and European Union Anti-Money Laundering/ Combating the Financing of Terrorism (AML/CFT) lists and encouraged them to keep up these efforts.

The mission met with: Prime Minister Pravind Jugnauth; Minister of Finance, Economic Planning and Development Dr. Renganaden Padayachy; Governor of the Bank of Mauritius Harvesh Seegolam; other senior government and Bank of Mauritius officials; the opposition leader; representatives of the private sector; civil society; and the diplomatic community.
The IMF stands ready to assist the authorities in the implementation of their economic program, including through the provision of capacity development, and looks forward to continuing fruitful policy dialogue.

Source: IMF press release — IMF Staff Completes 2021 Article IV Mission to Mauritius (May 7, 2021).