IMF Executive Board Concludes 2019 Article IV Consultation with Mauritius

April 23, 2019

On April 22, 2019,the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation 1 with Mauritius.

The Mauritian economy continues to grow at a steady pace, benefiting from a vibrant services sector and strong domestic demand. Real GDP expanded by 3.8 percent in 2017 and is estimated to have grown at a similar rate in 2018. Inflationary pressures are contained, and the unemployment rate has fallen to about 6.9 percent. The external balance continues to deteriorate due to a rising trade deficit in goods, but the overall balance of payments remains in surplus. International reserves have improved significantly since 2016, supported by continued financial inflows. Monetary policy remains accommodative, while the fiscal stance continues to be expansionary.

A prudent stance by financial services firms and supervisory agencies has helped to maintain financial stability. Activity in the offshore global business sector has been broadly resilient while reforms to the sector are underway. Notable efforts are being pursued to meet the international anti-tax avoidance initiatives and to strengthen the AML/CFT framework in line with the Financial Action Task Force (FATF) recommendations, though further reforms are needed to fully meet them.

Going forward, the growth momentum is expected to continue. Real GDP growth is projected at about 4 percent in the medium term. Without fiscal consolidation, the authorities’ debt target of 60 percent of GDP by FY2020/21 is unlikely to be met. Rather, public debt is projected to stay elevated over the forecast horizon, with the debt outlook being susceptible to a range of macro-fiscal shocks. As the revised tax treaty with India comes into effect, the global business sector is entering a transition phase, with efforts underway to move into high-value added services and tap into other markets, notably in the region.

Executive Board Assessment 2

Executive Directors welcomed Mauritius’ steady economic growth momentum and broadly positive macroeconomic outlook. Noting the rising fiscal and external sector vulnerabilities, Directors encouraged the authorities to pursue prudent policies to strengthen macroeconomic and financial resilience and to continue reforms to boost productivity and competitiveness.

Directors underscored the need for fiscal adjustment to enhance fiscal credibility, preserve debt sustainability, and reduce the external imbalance. Given the public investment needs, the authorities’ debt target of 60 percent of GDP for FY2020/21 is unlikely to be met without a significant policy adjustment. While the authorities are considering extending the target by two years, Directors urged a gradual fiscal consolidation beginning with the next budget for FY2019/20 to enhance fiscal credibility and to put public debt on a declining path.

Directors agreed that the monetary policy stance is broadly appropriate at the current juncture. They encouraged the authorities to continue their efforts to contain excess liquidity in the banking system. Further modernizing the monetary policy framework by building the necessary capacity to announce and track a medium‑term inflation objective would help to enhance policy credibility and improve resilience to shocks.

Directors highlighted the widening external imbalance. While international reserves have improved significantly on the back of strong financial inflows, given the large size of the offshore sector, Directors agreed that the foreign exchange intervention policy should continue to build reserves buffers as conditions permit, to strengthen resilience to shocks.

Directors appreciated the authorities’ efforts to bolster competitiveness by introducing effective and efficient initiatives to improve the business climate, build innovation capacity, reduce the skill mismatch, and increase female workforce participation. Maintaining strong and independent institutions is essential to ensure the country remains an attractive investment and employment destination.

Directors stressed the importance of implementing the outstanding FSAP recommendations for further strengthening financial stability. They also welcomed the steps taken to comply with the international anti‑tax avoidance initiatives and the efforts to strengthen the AML/CFT framework. In this context, they underscored the need to expeditiously implement the remaining recommendations of the Eastern and Southern African Anti Money Laundering Group (ESAAMLG). Directors also encouraged the authorities to continue to improve data quality.


Table 1. Mauritius: Selected Economic and Financial Indicators, 2015–24

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Est.

Budget

Est.

Proj.

(Annual percent change, unless otherwise indicated)

National income, prices and employment

Real GDP

3.6

3.8

3.8

3.8

3.9

3.9

4.0

4.0

4.0

4.0

Real GDP per capita

3.4

3.8

3.7

3.7

3.8

3.9

4.0

4.0

4.0

4.0

GDP per capita (in U.S. dollars)

9,259

9,681

10,491

11,281

11,694

12,433

13,226

14,097

14,947

15,835

GDP deflator

1.0

2.1

1.4

2.2

2.6

3.0

3.0

2.9

2.5

2.4

Consumer prices (period average)

1.3

1.0

3.7

3.2

2.1

3.7

3.5

3.4

3.4

3.4

Consumer prices (end of period)

1.3

2.3

4.3

1.8

4.1

3.6

3.5

3.4

3.4

3.4

Unemployment rate (percent)

7.9

7.3

7.1

6.9

6.9

6.9

6.8

6.8

6.8

6.7

(Annual percent change, in US Dollars)

External sector

Exports of goods and services, f.o.b.

-10.1

-3.5

3.9

5.9

3.8

5.0

5.5

5.7

5.7

5.7

Of which : tourism receipts

-1.0

9.8

11.2

7.2

7.7

7.9

7.9

7.9

7.8

0.0

Imports of goods and services, f.o.b.

-12.2

-1.7

11.4

6.8

6.2

3.2

2.5

2.5

2.6

2.6

Nominal effective exchange rate (annual average)

-1.0

1.8

2.5

0.3

...

...

...

...

...

...

Real effective exchange rate (annual average)

-1.0

1.2

3.9

1.3

...

...

...

...

...

...

Terms of trade

8.7

1.9

-4.1

-4.4

2.1

0.1

0.4

0.3

0.1

0.1

(Annual change in percent)

Money and credit

Net foreign assets

15.6

3.8

3.2

0.7

4.3

5.3

6.0

6.3

6.5

7.6

Net claims on government

-6.2

29.1

28.5

8.1

8.3

6.8

6.2

5.7

5.2

5.3

Credit to non-government sector

7.9

-0.8

4.1

6.1

5.4

5.8

6.0

6.1

6.1

6.1

Broad money

7.8

8.7

8.7

2.1

6.6

7.0

7.1

7.0

6.6

6.5

Income velocity of broad money (M2)

1.1

1.1

1.1

1.1

1.1

1.1

1.1

1.1

1.1

1.1

Interest rate (weighted average TBs, primary auctions)

1.9

2.5

2.1

...

...

...

...

...

...

...

(Percent of GDP, unless otherwise indicated)

Central government finances 1,2

Overall consolidated balance (including grants)

-3.7

-3.3

-2.9

-3.3

-3.0

-3.0

-2.9

-2.9

-2.9

-2.8

-2.8

Primary balance (excluding grants)

-1.4

-1.5

-1.0

-2.9

-1.8

-1.8

-1.6

-1.6

-1.6

-1.6

-1.6

Revenues (incl. grants)

20.8

21.1

21.4

23.3

22.4

22.1

22.0

21.7

21.6

21.5

21.5

Expenditure, excl. net lending

24.5

24.4

24.3

27.1

25.4

25.1

24.9

24.6

24.5

24.2

24.2

Domestic debt of central government

46.9

49.2

47.9

49.4

48.5

48.6

48.2

47.5

46.8

46.1

45.3

External debt of central government

12.7

10.4

9.4

8.6

9.5

9.4

9.2

9.2

9.4

9.6

9.6

Investment and saving 4

Gross domestic investment

18.1

17.9

18.3

18.4

21.1

22.0

21.2

20.3

20.4

20.9

Public

4.7

4.4

4.1

4.7

7.0

7.6

6.6

5.4

5.3

5.3

Private 2

13.4

13.5

14.1

13.6

14.1

14.4

14.6

14.9

15.1

15.6

Gross national savings

16.8

17.3

17.9

16.8

17.1

16.9

15.6

15.5

15.4

16.3

Public

-1.8

-2.1

-1.4

-0.7

-0.8

-1.0

-1.2

-1.4

-1.4

-1.3

Private

18.6

19.4

19.3

17.6

17.9

17.9

16.8

16.8

16.9

17.6

External sector

Balance of goods and services

-10.0

-10.3

-13.5

-13.7

-15.0

-13.8

-12.2

-10.5

-9.1

-7.6

Exports of goods and services, f.o.b.

46.1

42.5

40.7

40.1

40.1

39.6

39.3

39.0

38.9

38.8

Imports of goods and services, f.o.b.

-56.2

-52.8

-54.2

-53.8

-55.1

-53.5

-51.5

-49.5

-47.9

-46.4

Current account balance

-3.6

-4.0

-5.6

-6.2

-7.4

-6.7

-5.7

-5.5

-5.3

-5.0

Capital and financial account

9.3

10.9

10.8

8.7

8.0

7.5

6.9

6.8

6.3

6.8

Overall balance

4.9

6.0

6.2

2.5

0.6

0.8

1.2

1.3

1.1

1.8

Total external debt

90.3

86.6

77.0

78.5

83.0

82.9

81.6

80.4

79.7

78.9

Gross international reserves (millions of U.S. dollars)

4,222

4,934

5,974

6,329.9

6,423

6,552

6,754

6,978

7,178

7,534

Months of imports of goods and services, f.o.b.

7.8

8.2

9.3

9.3

9.2

9.1

9.2

9.2

9.3

9.3

Memorandum items:

GDP at current market prices (billions of Mauritian rupees)

409.9

434.8

457.5

485.2

517.0

553.5

592.9

634.6

676.6

720.6

GDP at current market prices (millions of U.S. dollars)

11,692

12,232

13,267

14,277

14,812

15,757

16,757

17,856

18,929

20,051

Public sector debt, fiscal year (percent of GDP)

66.9

65.0

63.7

64.9

67.5

67.8

66.7

65.5

64.4

63.3

Public sector debt, calendar year (percent of GDP)

63.6

64.4

63.7

65.1

Foreign and local currency long-term debt rating (Moody's)

Baa1

Baa1

Baa1

Sources: Mauritian authorities; and IMF staff estimates and projections.

1 GFSM 2001 concept of net lending/net borrowing, includes special and other extrabudgetary funds. Fiscal data reported for fiscal years (e.g, 2018=2018/19).

2 Includes changes in inventories.



1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

2 At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm .

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