{
  "title": "IMF Executive Board Concludes 2022 Article IV Consultation with Mauritius",
  "publication": "IMF News, June 17, 2022",
  "sourceUrl": "https://www.imf.org/en/news/articles/2022/06/17/pr22212-mauritius-imf-executive-board-concludes-2022-article-iv-consultation-with-mauritius",
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  "summary": "IMF Executive Board Concludes 2022 Article IV Consultation with Mauritius",
  "publishDate": "2022-06-17",
  "sections": [
    {
      "heading": "Recent economic developments",
      "content": "- Real GDP expanded by 4 percent in 2021 as many sectors recovered to pre-pandemic levels while the tourism sector remained subdued.\n- The current account deficit widened substantially in 2021.\n- Fiscal performance is expected to improve in FY2021/22 helped by quasi-fiscal operations, although the pandemic and new pressures on current spending burden the fiscal balance.\n- Inflation increased from 2.7 percent at end-2020 to 6.8 percent at end-2021 and further to 11 percent at end-April 2022.\n- The financial sector, including the Global Business Companies (GBCs) segment, was stable in 2021.\n- Mauritius exited from the Financial Action Task Force (FATF) list of jurisdictions under increased monitoring in October 2021 and the analogous EU and UK lists soon after.\n- The health impact of the pandemic was successfully managed, with a vaccination campaign covering over 90 percent of the eligible population by May 2022."
    },
    {
      "heading": "Outlook and staff projections",
      "content": "- Staff projects real GDP growth of 6.1 percent in 2022.\n- Tourist arrivals are expected at 60 percent of pre-pandemic levels, driving much of the rebound.\n- Unemployment is expected to decline as the economy recovers and to return to trend in the medium-term.\n- Annual inflation is expected to rise to 11.4 percent in 2022 due to surging commodity prices, past depreciation of the rupee, and recovering domestic demand.\n- The economy is expected to converge to its pre-pandemic trend growth of 3-3½ per-cent in the medium term.\n- Downside risks include the war in Ukraine, rising global inflation that reduces real disposable income and may weigh on global demand (including tourism), and higher freight costs."
    },
    {
      "heading": "Executive Board assessment — key findings",
      "content": "- The economy is recovering from the pandemic following a substantial contraction in 2020; most sectors are broadly back to pre-pandemic output levels except tourism.\n- The key macroeconomic challenge is to continue the recovery while controlling inflation in a global environment with high fuel and food prices and slower recovery.\n- The recovery is expected to continue but at a slower pace than projected before the war in Ukraine, reflecting lower growth in trading partners, less optimistic prospects for tourist flows, and worsening terms of trade.\n- Inflation has picked up substantially due to global supply bottlenecks, higher fuel and food prices, freight costs, and the past depreciation of the rupee.\n- The fiscal consolidation path needs careful calibration to balance pandemic recovery with long-term fiscal and debt sustainability.\n- Adhering to fiscal rules is critical to preserve fiscal sustainability and reduce debt vulnerabilities in the medium term.\n- Public debt is elevated after increasing during the pandemic; fiscal performance continues to be impacted by the pandemic and renewed pressures on current spending.\n- Targeted transfers to the vulnerable may be needed in the face of sharp increases in food and fuel prices.\n- If the economy continues to recover, revenue should increase and spending be reduced, including through pension system reform, to put debt on a declining path in the medium term.\n- The monetary policy normalization cycle needs to proceed to minimize potential second-round effects from supply-side shocks and to control inflation in the medium term.\n- The monetary policy framework needs to be modernized and the credibility and independence of the Bank of Mauritius (BOM) safeguarded.\n  - Staff recommends that the new monetary policy framework be rolled out soon to support policy effectiveness.\n  - Consistent with the inflation targeting framework, the BOM’s FX intervention strategy should aim to smooth volatility while generally allowing for exchange rate flexibility.\n  - The government needs to recapitalize the BOM per existing legislation for the BOM to accommodate the monetary policy costs.\n  - Reform of the BOM law should prohibit central bank’s transfers to the government and quasi-fiscal financing.\n  - Relinquishing the BOM ownership of the MIC would also help strengthen operational independence and financial position.\n- The external position at end-2021 was substantially weaker than suggested by fundamentals and desirable policies, although official foreign reserves remained broadly adequate.\n  - The current account gap was large and negative, pointing to substantial overvaluation of the rupee compared to its level consistent with long-term fundamentals.\n  - The external assessment is highly uncertain due to the transitory supply shock to tourism.\n  - Financing of the current account will continue to depend on financial and capital flows in the GBC sector; exit from AML/CFT listings should support flows, but indirect impact of sanctions on Russia may pose risks.\n- Mauritius should embrace structural transformation to continue sustainable and resilient long-term growth, prioritizing diversification, competitiveness, greater digitalization, and adaptation and mitigation policies to tackle climate change vulnerabilities."
    },
    {
      "heading": "Selected economic and financial indicators, 2019-2023",
      "content": "- Real GDP (percentage change): 2019: 3.0; 2020: -14.9; 2021: 4.0; 2022: 6.1; 2023: 5.6\n- Consumer prices (period average, percentage change): 2019: 0.5; 2020: 2.5; 2021: 11.9; 2022: 5.8\n- Unemployment rate (percent): 2019: 6.7; 2020: 9.2; 2021: 9.5; 2022: 7.8; 2023: 7.5\n- Net foreign assets (percent change): 2019: 13.5; 2020: 16.4; 2021: 18.6; 2022: 2.0; 2023: -1.3\n- Net claims on government (percent change): 2019: -3.8; 2020: 8.8; 2021: 34.8\n- Credit to non-government sector (percent change): 2019: 17.1; 2020: 2.7; 2021: -0.4; 2022: 5.5; 2023: 8.2\n- Broad money (percent change): 2019: 6.2; 2020: 17.7; 2021: 8.6; 2022: 1.9\n- Overall borrowing requirement (percent of GDP): 2019: -13.1; 2020: -23.1; 2021: -7.6; 2022: -3.9; 2023: -6.1\n- Revenues, including grants (percent of GDP): 2019: 22.7; 2020: 24.0; 2021: 23.9; 2022: 23.8\n- Expenditure, excluding net lending (percent of GDP): 2019: 34.5; 2020: 42.3; 2021: 33.1; 2022: 29.5\n- Current account balance (percent of GDP): 2019: -5.1; 2020: -9.2; 2021: -13.7; 2022: -13.5; 2023: -8.1\n- Gross international reserves (millions of U.S. dollars): 2019: 7,329; 2020: 7,242; 2021: 8,513; 2022: 6,801; 2023: 6,371\n- GDP at current market prices (billions of Mauritian rupees): 2019: 498.3; 2020: 429.7; 2021: 465.1; 2022: 520.1; 2023: 581.3\n- Public sector debt, fiscal year (percent of GDP): 2019: 84.6; 2020: 99.2; 2021: 92.4; 2022: 88.1; 2023: 86.1\n\nIMF Executive Board press release, June 17, 2022.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Mauritius and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2022/06/17/pr22212-mauritius-imf-executive-board-concludes-2022-article-iv-consultation-with-mauritius"
    }
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    "Published: June 17, 2022",
    "Real GDP expanded by 4 percent in 2021 as many sectors recovered to pre-pandemic levels while the tourism sector remained subdued.",
    "The current account deficit widened substantially in 2021.",
    "Fiscal performance is expected to improve in FY2021/22 helped by quasi-fiscal operations, although the pandemic and new pressures on current spending burden the fiscal balance.",
    "Inflation increased from 2.7 percent at end-2020 to 6.8 percent at end-2021 and further to 11 percent at end-April 2022.",
    "The financial sector, including the Global Business Companies (GBCs) segment, was stable in 2021.",
    "Mauritius exited from the Financial Action Task Force (FATF) list of jurisdictions under increased monitoring in October 2021 and the analogous EU and UK lists soon after.",
    "The health impact of the pandemic was successfully managed, with a vaccination campaign covering over 90 percent of the eligible population by May 2022.",
    "Staff projects real GDP growth of 6.1 percent in 2022.",
    "Tourist arrivals are expected at 60 percent of pre-pandemic levels, driving much of the rebound.",
    "Unemployment is expected to decline as the economy recovers and to return to trend in the medium-term.",
    "Annual inflation is expected to rise to 11.4 percent in 2022 due to surging commodity prices, past depreciation of the rupee, and recovering domestic demand.",
    "The economy is expected to converge to its pre-pandemic trend growth of 3-3½ per-cent in the medium term.",
    "Downside risks include the war in Ukraine, rising global inflation that reduces real disposable income and may weigh on global demand (including tourism), and higher freight costs.",
    "The economy is recovering from the pandemic following a substantial contraction in 2020; most sectors are broadly back to pre-pandemic output levels except tourism.",
    "The key macroeconomic challenge is to continue the recovery while controlling inflation in a global environment with high fuel and food prices and slower recovery.",
    "The recovery is expected to continue but at a slower pace than projected before the war in Ukraine, reflecting lower growth in trading partners, less optimistic prospects for tourist flows, and worsening terms of trade.",
    "Inflation has picked up substantially due to global supply bottlenecks, higher fuel and food prices, freight costs, and the past depreciation of the rupee.",
    "The fiscal consolidation path needs careful calibration to balance pandemic recovery with long-term fiscal and debt sustainability.",
    "Adhering to fiscal rules is critical to preserve fiscal sustainability and reduce debt vulnerabilities in the medium term.",
    "Public debt is elevated after increasing during the pandemic; fiscal performance continues to be impacted by the pandemic and renewed pressures on current spending.",
    "Targeted transfers to the vulnerable may be needed in the face of sharp increases in food and fuel prices.",
    "If the economy continues to recover, revenue should increase and spending be reduced, including through pension system reform, to put debt on a declining path in the medium term.",
    "The monetary policy normalization cycle needs to proceed to minimize potential second-round effects from supply-side shocks and to control inflation in the medium term.",
    "The monetary policy framework needs to be modernized and the credibility and independence of the Bank of Mauritius (BOM) safeguarded.",
    "The external position at end-2021 was substantially weaker than suggested by fundamentals and desirable policies, although official foreign reserves remained broadly adequate.",
    "Mauritius should embrace structural transformation to continue sustainable and resilient long-term growth, prioritizing diversification, competitiveness, greater digitalization, and adaptation and mitigation policies to tackle climate change vulnerabilities.",
    "Real GDP (percentage change): 2019: 3.0; 2020: -14.9; 2021: 4.0; 2022: 6.1; 2023: 5.6",
    "Consumer prices (period average, percentage change): 2019: 0.5; 2020: 2.5; 2021: 11.9; 2022: 5.8",
    "Unemployment rate (percent): 2019: 6.7; 2020: 9.2; 2021: 9.5; 2022: 7.8; 2023: 7.5",
    "Net foreign assets (percent change): 2019: 13.5; 2020: 16.4; 2021: 18.6; 2022: 2.0; 2023: -1.3",
    "Net claims on government (percent change): 2019: -3.8; 2020: 8.8; 2021: 34.8",
    "Credit to non-government sector (percent change): 2019: 17.1; 2020: 2.7; 2021: -0.4; 2022: 5.5; 2023: 8.2",
    "Broad money (percent change): 2019: 6.2; 2020: 17.7; 2021: 8.6; 2022: 1.9",
    "Overall borrowing requirement (percent of GDP): 2019: -13.1; 2020: -23.1; 2021: -7.6; 2022: -3.9; 2023: -6.1",
    "Revenues, including grants (percent of GDP): 2019: 22.7; 2020: 24.0; 2021: 23.9; 2022: 23.8",
    "Expenditure, excluding net lending (percent of GDP): 2019: 34.5; 2020: 42.3; 2021: 33.1; 2022: 29.5",
    "Current account balance (percent of GDP): 2019: -5.1; 2020: -9.2; 2021: -13.7; 2022: -13.5; 2023: -8.1",
    "Gross international reserves (millions of U.S. dollars): 2019: 7,329; 2020: 7,242; 2021: 8,513; 2022: 6,801; 2023: 6,371",
    "GDP at current market prices (billions of Mauritian rupees): 2019: 498.3; 2020: 429.7; 2021: 465.1; 2022: 520.1; 2023: 581.3",
    "Public sector debt, fiscal year (percent of GDP): 2019: 84.6; 2020: 99.2; 2021: 92.4; 2022: 88.1; 2023: 86.1",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[Mauritius and the IMF](http://www.imf.org/external/country/MUS/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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