{
  "title": "Public Information Notice: IMF Concludes 2004 Article IV Consultation with Mauritius",
  "publication": "IMF News, August 25, 2004",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/pn0498",
  "canonical": "https://www.imf.org/en/news/articles/2015/09/28/04/53/pn0498",
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  "summary": "Each Public Information Notice contains a background section, a table of selected economic indicators, and an Executive Board assessment.",
  "publishDate": "2004-08-25",
  "sections": [
    {
      "heading": "Background — macroeconomic developments and outlook",
      "content": "- Real GDP growth:\n  - 2002/03 (July-June): 2¾ percent\n  - 2003/04 (expected rebound): around 4½ percent\n  - Drivers: recovery of tourism and sugar production (favorable weather), continued strong construction and transportation activity.\n  - Export Processing Zone (EPZ) sector: registered negative growth for the second consecutive year due to high domestic production costs and increasing competition.\n- Unemployment:\n  - 2002: 9.7 percent\n  - 2003: 10.2 percent\n- Fiscal developments:\n  - Overall fiscal deficit 2002/03: 6.2 percent of GDP\n  - Overall fiscal deficit 2003/04 (estimated/in line with target): 5.5 percent of GDP\n  - Improvement primarily reflects higher tax and nontax revenue.\n  - Overall balance of 30 nonfinancial public sector corporations:\n    - 2001/02: deficit of 0.6 percent of GDP\n    - 2002/03: surplus of 0.9 percent of GDP\n  - Central Electricity Board (CEB): continues to face financial difficulties.\n  - State Trading Corporation (STC): financial position expected to improve after early April 2004 introduction of automatic mechanism for adjusting petroleum product prices.\n  - Public debt trajectory:\n    - Around 66 percent of GDP in 1999/00\n    - About 80 percent in 2002/03\n    - Projected at 73 percent of GDP by end-June 2004\n  - Risk: public debt could become unsustainable if central government fiscal deficits continue.\n- Monetary and financial conditions:\n  - Average annual inflation:\n    - 2002: 6.4 percent\n    - 2003: around 4 percent\n  - Bank of Mauritius (BOM) monetary policy:\n    - Lombard rate lowered in five steps by a total of 200 basis points to 9½ percent in late January 2004.\n    - Excess liquidity in the banking system due to cautious bank lending amid sectoral weaknesses.\n  - Financial system: generally sound.\n  - AML/CFT: government has taken actions to strengthen framework.\n- External sector:\n  - Overall balance of payments surplus projected to decline from 6½ percent of GDP in 2002/03 to below 2 percent in 2003/04.\n  - Current account: projected to remain in surplus as tourism recovery offsets widening trade deficit.\n  - Capital and financial account: projected small deficit of 0.8 percent of GDP in 2003/04 (compared with a surplus in 2002/03).\n  - FDI: expected to weaken in 2003/04.\n  - Portfolio investment inflows: expected strong growth (primarily from U.S. and U.K. mutual funds) due to high interest rate differentials."
    },
    {
      "heading": "Executive Board assessment — findings and policy recommendations",
      "content": "- Broad assessment and risks:\n  - Directors noted Mauritius' strong social and economic achievements over 25 years: strong GDP growth, high domestic savings, improving living standards, strong public institutions, good governance, rule of law, stable democratic system, transparent regulatory environment.\n  - Concerns: high and growing unemployment (especially among the unskilled), uncertain medium-term outlook for key sectors, large stock of domestic public debt.\n- Fiscal policy recommendations:\n  - Continue implementing structural adjustments and reforms (especially sugar and textile sectors and the labor market) and reduce persistent budget deficits to safeguard past achievements and strengthen medium-term fiscal sustainability.\n  - Urged further measures to reduce the deficit to return domestic public debt to a sustainable path and stabilize the debt-to-GDP ratio over the medium term.\n  - Revenue-side recommendations:\n    - Broaden the income tax base.\n    - Extend the VAT to additional items.\n  - Spending-side recommendations:\n    - Prioritize government expenditures more carefully.\n    - Stretch out non-critical capital projects.\n    - Target generalized subsidies for rice and flour to only disadvantaged groups.\n  - Institutional reform:\n    - Creation of a debt management unit in the Ministry of Finance to improve the maturity structure of the debt.\n  - Maintain fiscal discipline in the period leading to the general elections.\n- Monetary and exchange rate policy:\n  - Commended reduction in inflation.\n  - Urged BOM to monitor excess liquidity closely to guard against rapid credit expansion and increased inflation.\n  - Encouraged review of the effectiveness of monetary policy instruments, in particular the signaling role of the Lombard rate.\n  - Noted the real effective exchange rate appears broadly in line with macroeconomic fundamentals.\n  - Welcomed policy of allowing the exchange rate to respond to market forces and supported view that external competitiveness should be fostered through real productivity gains.\n- Financial sector and markets:\n  - Considered the financial system well developed, sound, and profitable.\n  - Welcomed authorities' positive response to Financial Sector Assessment Program recommendations (2003).\n  - Recommended development of an efficient corporate bond market to allow institutional investor diversification and reduce credit concentration.\n  - Welcomed issuance of guidance notes to banks on anti-money laundering and countering financing of terrorism and passage of the Convention on the Suppression of the Financing of Terrorism Act 2003.\n- Structural reforms, labor market, and competitiveness:\n  - Encouraged steps to address impending loss of trade preferences in sugar and textile sectors; welcomed planned review of the Sugar Sector Strategy.\n  - Welcomed establishment of the Textile Emergency Support Team to assist rehabilitation and restructuring of viable textile enterprises.\n  - Called for closer link between wage increases and productivity growth to facilitate textile sector restructuring, stimulate job creation, and improve competitiveness.\n  - Urged making the wage bargaining system more flexible and streamlining labor regulations to stem rise in unit labor costs.\n  - Welcomed measures to improve access to education and strengthen curricula at all levels to alleviate skills mismatch and raise employment over the medium term.\n- Economic diversification and infrastructure:\n  - Commended efforts to diversify into financial services, tourism, and information and communications technology.\n  - Urged greater opportunities for private sector participation in infrastructure development (public utilities, transportation, commercial areas) while noting potential costs and risks of public-private partnerships.\n- Trade policy:\n  - Welcomed authorities' commitment to trade liberalization and reduction of customs duties in the 2004/05 budget.\n  - Urged announcement of a medium-term tariff reform program, including lowering maximum and average tariff rates."
    },
    {
      "heading": "Selected economic indicators (as presented)",
      "content": "- Domestic economy (annual percentage change)\n  - Real GDP:\n    - 1999/00: 2.7\n    - 2000/01: 7.6\n    - 2001/02: 4.3\n    - 2002/03: 4.4\n    - Prov. 2003/04: (not separately listed in table)\n  - Consumer prices (period averages):\n    - 1999/00: 5.3\n    - 2000/01: 6.4\n    - 2001/02: 5.1\n    - 2002/03: 3.9\n  - Unemployment:\n    - 1999/00: 7.7\n    - 2000/01: 8.8\n    - 2001/02: 9.1\n    - 2002/03: 9.7\n    - Prov. 2003/04: 10.2\n- External economy (in millions of U.S. dollars, unless otherwise indicated)\n  - Exports, f.o.b:\n    - 1999/00: 1,522.6\n    - 2000/01: 1,639.0\n    - 2001/02: 1,592.9\n    - 2002/03: 1,843.5\n    - Prov. 2003/04: 2,016.9\n  - Imports, f.o.b.:\n    - 1999/00: -2,006.5\n    - 2000/01: -1,891.9\n    - 2001/02: -1,798.2\n    - 2002/03: -2,129.4\n    - Prov. 2003/04: -2,328.1\n  - Current account balance:\n    - 1999/00: -68.7\n    - 2000/01: 154.3\n    - 2001/02: 247.8\n    - 2002/03: 136.1\n    - Prov. 2003/04: 155.6\n  - Current account (in percent of GDP):\n    - 1999/00: -1.6\n    - 2000/01: 3.4\n    - 2001/02: 5.4\n    - 2002/03: 2.6\n  - Capital and financial account:\n    - 1999/00: -18.7\n    - 2000/01: 90.2\n    - 2001/02: -12.2\n    - 2002/03: -108.8\n    - Prov. 2003/04: -44.7\n  - Net international reserves of the Bank of Mauritius (end of period):\n    - 1999/00: 688.0\n    - 2000/01: 789.3\n    - 2001/02: 1,017.0\n    - 2002/03: 1,438.5\n    - Prov. 2003/04: 1,549.3\n  - Reserves (in months of prospective imports, c.i.f.) 2/:\n    - 1999/00: 4.1\n    - 2000/01: 5.0\n    - 2001/02: 6.9\n    - 2002/03: 7.5\n  - Debt service (in percent of exports of goods and nonfactor services):\n    - 1999/00: 7.9\n    - 2000/01: 9.8\n    - 2001/02: 8.4\n    - 2002/03: 8.2\n    - Prov. 2003/04: 6.0\n  - Change in real effective exchange rate (in percent) 3/:\n    - 1999/00: 5.7\n    - 2000/01: -1.9\n    - 2001/02: -1.0\n    - 2002/03: ...\n- Financial variables (in percent of GDP, unless otherwise indicated) 2/\n  - Total public debt:\n    - 1999/00: 65.8\n    - 2000/01: 64.4\n    - 2001/02: 70.5\n    - 2002/03: 80.5\n    - Prov. 2003/04: 72.8\n  - Total revenues and grants:\n    - 1999/00: 20.9\n    - 2000/01: 18.2\n    - 2001/02: 18.4\n    - 2002/03: 20.3\n  - Total expenditures and net lending:\n    - 1999/00: 24.7\n    - 2000/01: 23.9\n    - 2001/02: 24.4\n    - 2002/03: 26.5\n    - Prov. 2003/04: 26.4\n  - Central government fiscal balance 4/ (including grants):\n    - 1999/00: -3.8\n    - 2000/01: -5.7\n    - 2001/02: -5.9\n    - 2002/03: -6.2\n    - Prov. 2003/04: -5.5\n  - Primary fiscal balance 4/ 5/ (overall central government fiscal balance, excluding interest payments):\n    - 1999/00: -0.4\n    - 2000/01: -1.3\n    - 2001/02: -2.6\n    - 2002/03: -1.5\n  - Change in broad money (in percent):\n    - 1999/00: 10.9\n    - 2000/01: 9.9\n    - 2001/02: 13.0\n    - 2002/03: 11.7\n    - Prov. 2003/04: 9.6\n  - Interest rate (in percent) 6/ (Average prime lending rate, end of fiscal year):\n    - 1999/00: 11.0\n    - 2000/01: 11.1\n    - 2001/02: 10.6\n    - 2002/03: 9.0\n    - Prov. 2003/04: 7.0\n- Notes from table:\n  - 1/ Fiscal year from July to June.\n  - 2/ Excluding the acquisition of aircraft and ships.\n  - 3/ Trade-weighted period averages; data for 2002/03 are for July-Feb. 2003. A negative sign signifies a depreciation.\n  - 4/ Including grants.\n  - 5/ Overall central government fiscal balance, excluding interest payments.\n  - 6/ Average prime lending rate (end of fiscal year, in percent).\n\nSource: Public Information Notice: IMF Concludes 2004 Article IV Consultation with Mauritius, August 25, 2004.\n\n---\n\n\n References\n\n- Mauritius and the IMF\n- Public Information Notices\n- Article IV\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/pn0498"
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    "Published: August 25, 2004",
    "Real GDP growth:",
    "Unemployment:",
    "Fiscal developments:",
    "Monetary and financial conditions:",
    "External sector:",
    "Broad assessment and risks:",
    "Fiscal policy recommendations:",
    "Monetary and exchange rate policy:",
    "Financial sector and markets:",
    "Structural reforms, labor market, and competitiveness:",
    "Economic diversification and infrastructure:",
    "Trade policy:",
    "Domestic economy (annual percentage change)",
    "External economy (in millions of U.S. dollars, unless otherwise indicated)",
    "Financial variables (in percent of GDP, unless otherwise indicated) 2/",
    "Notes from table:",
    "[Mauritius and the IMF](http://www.imf.org/external/country/MUS/index.htm)",
    "[Public Information Notices](https://www.imf.org/en/news/searchnews)",
    "[Article IV](https://www.imf.org/external/pubs/ft/aa/aa04.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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