Press Release No. 08/47

Press Release: Statement by an IMF Staff Mission at the Conclusion of the 2008 Article IV Discussions with Mauritius

March 11, 2008

An International Monetary Fund (IMF) mission headed by Paul Mathieu, Mission Chief for Mauritius, issued the following statement on March 11, 2008 in Port Louis:

"An IMF staff mission visited Port Louis during February 27-March 11, 2008 to conduct the Article IV consultation discussions. The mission reviewed economic developments and prospects and discussed the authorities' economic policy intentions. The mission met with Prime Minister Navinchandra Ramgoolam, Minister of Finance Rama Sithanen, Governor of the Bank of Mauritius Rundheersing Bheenick, other senior government officials, as well as representatives of the of the political opposition, trade unions, private sector, civil society, and the diplomatic community.

"The economic recovery is accelerating with strong growth in tourism, construction, finance, and services. Foreign investment is growing rapidly in response to the reform efforts, notably those which have improved the business environment and lowered tax rates. Real economic growth is projected to rise to about 7 percent in 2007/08. Unemployment has been moderating, but inflation remains a concern. Fiscal policy has been tightened as revenues have risen in response to tax reforms and expenditure has been contained. The external current account deficit has widened somewhat on strong foreign investment-stimulated import growth. The institutional framework for monetary policy has been revised to strengthen the focus on reducing inflation. Increased efficiency in the management of public funds is needed to support monetary policy in the face of large capital inflows.

"The challenge is to sustain the reform effort to improve competitiveness and address bottlenecks to economic growth. The budget deficit needs to be reduced further over the medium term to lower public debt and counterbalance the impact of strong foreign capital inflows on aggregate demand. Efforts to improve the effectiveness of social assistance and expand the tax base should be continued to create the fiscal space needed for education and the retraining of the labor force as well as to raise investment spending on much needed infrastructure. Structural reforms, including those to improve labor market flexibility, stimulate greater competition in goods markets, and lower costs of doing business need to be carried forward to improve the supply response to the foreign investment stimulus. Efforts to protect vulnerable groups and ensure that the benefits of economic recovery are widely distributed are also vital.

"The IMF stands ready to continue assisting the authorities in the implementation of its reform program, including through the provision of technical assistance, and looks forward to continued fruitful policy dialogue in the period ahead."