20240527-IMF-Mauritius_2024_Article_IV_Consultation-Press_Release_Staff_Report_and_Statement_by_the_Executive_Director_for_Mauritius_74页_1mb

Summary of 2024 Article IV Consultation with Mauritius

Core Content

The International Monetary Fund (IMF) conducted a 2024 Article IV consultation with Mauritius, resulting in the release of a Press Release, Staff Report, and a Statement by the Executive Director. The consultation focused on assessing the country's economic recovery, future outlook, and policy recommendations to ensure long-term sustainability and resilience.

Main Points and Key Information

Economic Recovery

• Mauritius rebounded strongly from the pandemic, with real GDP growth reaching 8.9% in 2022 and an estimated 7% in 2023, exceeding pre-pandemic levels.
• Key drivers of growth included tourism, social housing construction, and financial services.
• Unemployment fell to 6.3% in Q3 2023, the lowest in 27 years, and youth unemployment dropped to 17.8% from 25% in Q4 2022.
• Inflation declined in 2023 to 7%, and is expected to ease further to 4.9% in 2024, aligning with the Bank of Mauritius (BOM)’s medium-term target of 3.5%.

Fiscal and External Challenges

• Fiscal and external buffers were eroded during the pandemic.
• Public debt stood at 81% of GDP in June 2023, down from 91.9% in June 2021.
• The external current account deficit narrowed to 4.5% of GDP in 2023, primarily due to the recovery in tourism earnings.

Outlook and Risks

• Real GDP growth is projected at 4.9% in 2024 and around 3.5% in the medium term.
• Risks to the outlook include deterioration in global growth, higher-than-anticipated fuel and food prices, and extreme climate events.

Policy Recommendations

A. Rebuilding Fiscal Buffers

• A gradual and growth-friendly fiscal consolidation is needed to rebuild fiscal buffers and reduce public debt.
• Contain current spending while protecting critical social spending for the most vulnerable.
• Reinstate and strengthen the public debt ceiling framework.
• Extend social benefits and housing subsidies to support households affected by inflation.

B. Managing Inflation and Monetary Policy

• The monetary policy framework should be strengthened to better manage inflationary pressures.
• The BOM should be ready to tighten monetary policy if inflationary pressures reemerge.
• Resume uncapped auctions to align the interbank rate with the key policy rate.
• Amend the BOM Act to protect central bank independence and reinforce the credibility of monetary policy.
• Consider phasing out the central bank's ownership of the Mauritius Investment Corporation (MIC).

C. Financial Sector Stability

• Continue close monitoring of financial sector risks, especially those related to global business companies (GBCs) operating in the Mauritius International Financial Center.
• Sustain AML/CFT compliance and enhance monetary policy transmission.
• Improve communication strategies to better align market expectations with policy goals.

D. Structural Reforms

• Boost female labor force participation and address skill mismatches.
• Foster digitalization and climate-resilient infrastructure investment.
• Promote external competitiveness and economic diversification to achieve high-income status.

E. Governance and Institutional Strengthening

• Strengthen governance and anti-corruption frameworks.
• Streamline extra-budgetary special funds to improve public financial management.

Key Tables and Indicators

Selected Economic and Financial Indicators (2019–2029)

• Real GDP growth: 2.9% in 2019, 8.9% in 2022, 7.0% in 2023, and 4.9% in 2024.
• GDP per capita (USD): Increased from 11,408 in 2019 to an estimated 22,883 in 2029.
• Public debt: Decreased from 91.9% of GDP in 2021 to 76.9% in 2029.
• Consumer price inflation: Fell from 10.8% in 2022 to 7% in 2023, and is expected to moderate to 4.9% in 2024.

Central Government Finances

• Primary balance (excluding grants): Improved from -16.5% in 2020 to -2.9% in 2023, and is expected to -3.1% in 2024.
• Overall borrowing requirement: Reduced from 4.7% of GDP in 2022 to -5.4% in 2023.
• Domestic debt: Decreased from 67.5% of GDP in 2020 to 56.5% in 2029.

External Sector

• External current account deficit: Reduced to 4.5% of GDP in 2023, from 11.1% in 2022.
• Exports of goods and services: Increased to 38.0% of GDP in 2023, while imports declined to -55.1% of GDP.
• Net foreign assets: Increased from 13.5% of GDP in 2019 to 1.4% in 2029.
• Months of imports coverage: Remained stable at 9.5 months.

Conclusion

The IMF Executive Board endorsed the staff report and emphasized the need for prudent fiscal policies, effective monetary policy frameworks, and structural reforms to address long-term challenges such as climate change, an aging population, and economic diversification. The next Article IV consultation with Mauritius is expected to follow the standard 12-month cycle.