Press Release: IMF Staff Completes 2015 Article IV Mission to Mauritius
IMF News, December 16, 2015
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- Published: December 16, 2015
Mission overview
- An International Monetary Fund (IMF) mission led by Mauro Mecagni visited Port Louis on December 2–16, 2015 to conduct the discussions for the 2015 Article IV consultation with Mauritius.
- End-of-Mission press releases convey preliminary findings after a visit; the views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.
- The mission met with Prime Minister Anerood Jugnauth, Vice Prime Minister and Minister of Tourism and External Communication Xavier-Luc Duval, Minister of Finance and Economic Development Seetanah Lutchmeenaraidoo, Governor of the Bank of Mauritius Rameswurlall Basant Roi and other senior officials as well as the private sector, academia and civil society.
Economic assessment — key findings
- The Mauritian economy has remained resilient in 2015 despite some difficult domestic developments and volatility in other emerging and frontier markets.
- Growth and inflation:
- The economy continued to grow at the respectable rate of over 3 percent in per capita terms.
- Inflation fell to an historical low: 1 percent in November 2015.
- Fiscal and public debt:
- The fiscal deficit for the first half of the year was lower than projected.
- Public debt rose due to the injection of public capital in two banks, and the impact of the rupee depreciation on external debt.
- Liquidity, external accounts, and reserves:
- Excess domestic liquidity was significantly reduced.
- The external current account deficit has declined.
- International reserves have risen to the equivalent of over 6 months of imports.
Medium-term outlook and projections
- Outlook conditional on sound policies:
- The medium-term outlook is favorable if sound policies continue to be implemented.
- Implementation of new public investment programs would catalyze private investment and help to raise GDP growth to close to 4 percent in 2016 and beyond, with rates of inflation below 3 percent.
- Higher imports associated with these investment programs are likely to widen the current account deficit to some 6–6.5 percent of GDP.
- International reserves are nonetheless projected to strengthen gradually, supported by continued capital inflows as Mauritius seeks to leverage its financial sector as a hub to channel significant investments to Africa and Asia.
Main challenges and policy recommendations
- Main challenges for 2016 and beyond:
- Reducing public debt through a growth-friendly and pro-poor medium-term fiscal consolidation effort.
- Further increasing the resilience of the financial sector by strengthening the macro-prudential oversight framework.
- Addressing reforms needed to transition to high-income status, in particular improving productivity and competitiveness.
- Addressing infrastructure bottlenecks, skill mismatches and gender inequality in the labor market.
- Fiscal policy recommendations:
- Create fiscal space to implement the government’s ambitious investment program while reducing public debt in the medium term.
- Reduction of subsidies, better targeting of social assistance programs and improved efficiency in public enterprises to tilt government expenditure toward infrastructure, human capital development spending and pro-poor programs.
- Increase revenues by reducing tax exemptions and further broadening the tax base.
- The mission welcomes the authorities’ decision to gradually eliminate special funds by 2018, and the ongoing preparation for divestiture of assets targeted at debt reduction.
- Monetary and financial sector recommendations:
- Given the low inflation environment, the current monetary policy stance is broadly appropriate.
- Continue the Bank of Mauritius’ efforts in mopping up excess domestic liquidity to enhance the responsiveness of market interest rates to changes in the monetary policy rate.
- Strengthen financial sector supervision, improve the regulatory framework, and deepen coordination among regulatory agencies to boost resilience to domestic and external shocks.
- Structural reforms recommended to support growth and labor markets:
- Stimulate female labor force participation to help mitigate the effect of the projected decline in Mauritius’ labor force in the next decades.
- Invest in interconnectivity, transportation and communication.
- Strengthen the institutional framework to lower the cost of doing business and preserve macroeconomic and financial stability.
Closing remarks
- The mission thanked the Mauritian authorities for their cooperation and productive discussions.
- The IMF stands ready to support the authorities’ reform efforts, including through the provision of technical assistance, and looks forward to continued policy dialogue.
IMF Press Release No. 15/564 — Press Release: IMF Staff Completes 2015 Article IV Mission to Mauritius (December 16, 2015).