"Mauritius is gradually recovering from the pandemic. The public health impact of the pandemic was well managed, including by a remarkable vaccination campaign covering over 90 percent of the eligible population by May 2022. Large and comprehensive support measures helped cushion the social and economic impact of the pandemic".
This statement was made by the International Monetary Fund (IMF)'s Mission Chief for Mauritius, Ms. Cemile Sancak, at a hybrid press conference, this afternoon, in Ebène. It is recalled that the IMF undertook a mission to Mauritius led by Ms Sancak from 27 April 2022 to 10 May 2022 to conduct the discussions for the 2022 Article IV consultations, the regular assessment of the country's macroeconomic health.
The press conference was an opportunity for the IMF's mission team to discuss the economic outlook for Mauritius at the conclusion of the Article IV consultation with the media.
Ms Sancak highlighted that as the recovery solidifies, it is essential to deploy a comprehensive fiscal consolidation plan to ensure debt sustainability and normalise monetary policy stance in a timely manner to control inflation in the medium term. Furthermore, she underscored the need to improve competitiveness, diversify the economy, and embark on structural transformation in order to increase the sustainability and resilience of the economy.
The Mission Chief for Mauritius pointed out that while the economy is gradually recovering from the pandemic and most sectors including the tourism sector, are recovering and have returned to pre-pandemic levels of economic activity while inflation has picked up substantially.
She stressed on the impact that the war in Ukraine has had on growth projections, less optimistic prospects for global tourist flows, and worsening terms of trade. "Nevertheless, the recovery is expected to continue, driven essentially by the tourism sector and the Mission expects tourist arrivals to reach about 60 percent of pre-pandemic levels in 2022," Ms Sancak announced.
On this note, Ms Sancak dwelt on some measures and recommendations that the Government needs to undertake in face of increasing inflation which is expected to further rise to 11½ percent in 2022, due to surging fuel and food prices, the past depreciation of the Rupee, and recovering domestic demand. The measures to be implemented include: improvement of air connectivity to effectively support the recovery of tourism flows to pre-pandemic levels; further fiscal consolidation to restore fiscal space and ensure debt sustainability; protection of the vulnerable population with targeted transfers through social safety net programmes while avoiding broad-based subsidies benefiting all income levels in face of increasing fuel and food prices; reforming the pension system to support fiscal sustainability; and fiscal consolidation through credible revenue and expenditure measures.
In addition, she recommended that as the economy exits the pandemic, reinstating fiscal rules, including a medium-term debt anchor, would help preserve fiscal sustainability and reduce debt vulnerabilities, while allowing for flexibility to address shocks. Ms Sancak reiterated that improving effectiveness of monetary policy and safeguarding the central bank independence need to remain priorities.
As regards the Bank of Mauritius (BoM), she indicated that the BoM exerted a welcome effort to modernise its policy framework, and the mission recommends, among others, the roll out of the new framework to take place at the soonest; the Government, consistent with the BoM Act, needs to cover BoM's losses which may materialise due to increasing policy implementation costs already in the near- to medium-term; the exchange rate policy, consistent with the new monetary policy framework, should allow for greater exchange rate flexibility; and that the BoM relinquish ownership of the Mauritius Investment Corporation Ltd (MIC) for the latter to be taken over either by the Government or folded into the Development Bank of Mauritius Ltd.
"Improving the legal framework and addressing governance issues are important to allow for further safeguards to the central bank's independence. The ongoing review of the banking and central bank legislations is welcome, and the Mission advises expediting their submission to the Parliament," the IMF Chief for Mauritius stressed.
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Ms Sancak also lauded the exit of Mauritius from the Financial Action Task Force (FATF) list of jurisdictions under increased monitoring and welcomed the authorities' reform efforts to continue strengthening its AML/CFT regime, particularly as related to non-resident and cross-border activity.
She outlined some additional measures as regards the diversification of the economy which will remain critical to support the recovery and Mauritius's aspiration to become a high-income country, namely by reducing the shortage of suitably skilled workers; greater digitalisation; and addressing climate change to help the economy build resilience against shocks. "Diversification needs to be supported by a comprehensive reform agenda to identify priorities, address obstacles, and increase efficiency, including by finding complementarities between the public and private sector and the civil society", Ms Sancak added.
