Press Release No. 21/125

IMF Staff Completes 2021 Article IV Mission to Mauritius

May 7, 2021

• Mauritius has been successful in containing the Covid-19 virus thanks to strict health measures.
• In the short-term, accommodative fiscal and monetary stances are appropriate. As the country emerges from the pandemic, fiscal consolidation will be necessary to stabilize public debt, and monetary policy measures will need to be strengthened.
• During the recovery phase, Mauritius should prioritize support measures to improve the economy’s resilience and competitiveness and accelerate its long-term structural transformation.

Washington, DC: An International Monetary Fund (IMF) mission led by Cemile Sancak undertook a virtual visit to Mauritius during April 19-May 7, 2021 to conduct the discussions for the 2021 Article IV consultations.

At the conclusion of the virtual visit, Ms. Sancak issued the following statement in Washington:

"Mauritius has been successful in containing the Covid-19 pandemic so far thanks to strict health measures. Mauritius has had very few cases of domestic transmission of Covid-19 following a strict nationwide lockdown during March-May 2020 and closure of the border until early October. Building on the country’s strong public health system, the authorities were able to rapidly contain outbreaks by implementing extensive testing, robust contact tracing, and strict isolation of all suspected and confirmed cases, and maintaining mask requirements in all public places. As border restrictions were eased, comprehensive testing of arrivals and strict quarantine requirements were put in place. An outbreak of domestic transmission led to a second lockdown in March 2021, though it was shorter in duration and more flexible than that of the previous year. Vaccinations began in February, and the authorities target vaccinating 60 percent of the population by July 2021.

“Despite the country’s success in containing the pandemic so far, the pandemic has seriously impacted the economy due to the sharp decline in tourism and contributed to a contraction of real GDP by nearly 15 percent in 2020. The authorities have successfully implemented a large and comprehensive set of stimulus measures to mitigate the impact of the pandemic on the economy, including a wage subsidy and income support for the self-employed, to support firms and households while preserving financial stability.

“The key macroeconomic challenge for Mauritius is to restore employment and growth despite the tourism sector remaining subdued at least through 2022. IMF staff projects growth to be about 5 percent in 2021, assuming some recovery in tourism. As the country emerges from the pandemic, however, there is uncertainty about tourism flows, which depend on the propensity to travel as the pandemic recedes as well as conditions in other countries.

“The mission supported the authorities’ overall fiscal policy response and advised them to continue the accommodative fiscal stance during the reopening phase with prioritized and targeted expenditures to set the stage for resilient growth. The mission recommended prioritizing programs that are consistent with medium-term development needs and broader social and environmental goals, such as digitalization, inclusion, and climate change mitigation during the recovery phase.

“The government should prepare plans for fiscal consolidation to stabilize debt in the medium term once Mauritius has firmly emerged from the pandemic to preserve fiscal sustainability and build buffers given the substantial increase in public debt level, which is likely to exceed 90 percent of GDP in the wake of the crisis.

“The mission supported the monetary policy response to the crisis and advised the central bank to maintain accommodative monetary policy in the near term. It recommended strengthening the monetary policy lever in anticipation of the waning of the crisis. Mechanisms should be phased in to further support the central bank’s credibility and solidify an effective monetary policy as the economy recovers to a normal level of capacity utilization and the need for monetary policy normalization becomes apparent. The central bank law is being reformed, including to preempt further exceptional transfers to the government, in line with international best practices. In addition, the mission recommended that the central bank should relinquish ownership of the Mauritius Investment Corporation (MIC), and financing of the MIC should be provided through the budgetary process.

“During the recovery phase, the authorities should prioritize support measures to further improve competitiveness, enhance diversification, and accelerate the long-term structural transformation to turn Mauritius into sustainable and resilient economy built on education and technology.

“The mission welcomed the authorities’ concerted efforts to exit from the Financial Action Task Force (FATF) and European Union Anti-Money Laundering/ Combating the Financing of Terrorism (AML/CFT) lists and encouraged them to keep up these efforts.

“The mission met with the Prime Minister Pravind Jugnauth, the Minister of Finance, Economic Planning and Development Dr. Renganaden Padayachy, the Governor of the Bank of Mauritius Harvesh Seegolam, and other senior government and Bank of Mauritius officials, as well as the opposition leader, representatives of the private sector, civil society, and the diplomatic community.

“The mission team expresses its gratitude to the authorities for the productive discussions and excellent cooperation. The IMF stands ready to assist the authorities in the implementation of their economic program, including through the provision of capacity development, and looks forward to continuing fruitful policy dialogue.”