STATE OF THE ECONOMY

GOVERNMENT OF MAURITIUS
STATE OF THE ECONOMY

GOVERNMENT OF MAURITIUS
 Table of Contents

Foreword

PART 1: STATE OF ECONOMIC FUNDAMENTALS

Chapter 1: Economic Growth

Chapter 2: Investment and Trade

Chapter 3: Monetary Policy, Foreign Exchange Reserves and the Mauritius

Investment Corporation Ltd

Chapter 4: Inflation

Chapter 5: Labour Market

Chapter 6: Productivity

Chapter 7: Budget Deficit

Chapter 8: Public Sector Debt

Chapter 9: Contingent Liabilities

PART 2: CONSTRAINTS AND CHALLENGES

Chapter 10: Structural Constraints facing the Economy

Chapter 11: Challenges of Climate Change and Adaptation

Chapter 12: Sectoral Challenges

Chapter 13: Pressing Social Issues

Chapter 14: Conclusion

2
 Foreword

The new Alliance du Changement Government was widely acclaimed by the population
on the basis of its principles of transparency, good governance and the consolidation of our
democratic values. The people have also entrusted this Government with the urgent and crucial
task of redressing the ruinous legacy of the previous Government. They want us to ensure that
our development regains its dynamism that it has lost since 2014. To fulfil this task and live
up to the expectations of the people, we must first assess the status of the economy.

2. Thus, this document is structured in two parts.

3. Part 1 provides an extensive view of the actual state of economic fundamentals

focusing on:
(a) economic growth;
(b) investment and trade;
(c) monetary policy, foreign currency reserves and the Mauritius Investment
Corporation Ltd;
(d) inflation;
(e) labour market;
(f) productivity;
(g) budget deficit;
(h) public sector debt; and
(i) contingent liabilities.

4. Part 2 identifies and analyses the constraints and challenges that this Government and,
indeed, the whole nation will have to face when reversing the precarious legacy. They include:
(a) structural constraints facing the economy;
(b) challenges of climate change and adaptation;
(c) sectoral challenges; and
(d) pressing social issues.

5. The challenge going forward is clearly mind boggling.

10 December 2024

3
 PART 1

STATE OF ECONOMIC
FUNDAMENTALS

4
 Chapter 1
ECONOMIC GROWTH

GDP Growth
It is clear that there has been a deliberate trimming and cooking of data under the
previous Government to convey a false sense of economic progress. After a thorough review
of the situation, it has been found that GDP growth data have been grossly exaggerated.

2. The real GDP growth rate for 2023 is now estimated at 5.6%, lower than the
September 2024 estimate of 7%. The September estimate was obtained following deliberately
exaggerated high growth rates for some sectors, particularly the construction sector.

3. The growth rate for 2024 has similarly been inflated to 6.5%. According to updated
data from Statistics Mauritius, the new forecast for 2024 is a growth rate of 5.1%.

4. The table below shows the revisions in the figures.

Table 1: Gross Domestic Product

2022 2023 2024

Published Published Published
Updated Updated Updated
in Sept 24 in Sept 24 in Sept 24
GDP Growth Rate (%) 8.9 8.7 7.0 5.6 6.5 5.1
GDP Deflator (%) 9.6 9.6 8.5 6.5 4.1 3.6
GDP at market prices (Rs bn) 571.2 570.3 662.9 641.3 734.8 698.5
Source: Statistics Mauritius

5. The main changes in growth rates are in the following sectors.

Table 2: GDP Growth – Main Sectors

2022 2023 2024
Published Published Published
Updated Updated Updated
in Sept 24 in Sept 24 in Sept 24
Construction (%) 1.3 1.3 37.4 21.3 38.8 25.0
Wholesale & retail trade (%) 3.0 3.0 3.6 3.0 3.9 3.2
Accommodation and food
200.8 192.4 26.8 25.7 7.4 7.4
service activities (%)
Information &
4.0 4.0 6.0 4.0 6.6 4.4
communication (%)
Financial & insurance
4.2 4.2 4.3 3.9 4.8 4.4
activities (%)
Source: Statistics Mauritius
5
6. In 2022, nominal GDP in rupee terms exceeded the 2019 level, mainly due to the
depreciation of the rupee. However, in USD terms, nominal GDP was well below the 2019
level even in 2023.

Graph 1: Nominal GDP (Index)

Nominal GDP at market prices (Index)

130

120

110

100

90

80

70
2019 2020 2021 2022 2023

GDP in Rs GDP in USD

Source: Statistics Mauritius

Inclusion of GBC Output in Exports of Services

7. In 2021, Statistics Mauritius received Technical Assistance from the IMF on National
Accounts. One of the recommendations of the IMF was to incorporate an estimated value of
the output of GBCs in the compilation of Exports of Services. The rationale for this change
was that GBCs in Mauritius carry out the majority of their activities vis-à-vis non-residents,
implying an export of services.

8. At the same time, an adjustment of primary income from the rest of the world was made
in the National Accounts to maintain consistency with the Balance of Payments. The increase
in exports was offset by a decrease of investment income recorded under Gross National
Income. As a result, the current account balance remained unchanged.

9. However, these changes were not explicitly reflected in the Balance of Payments
statistics compiled by the Bank of Mauritius, as it was recording investment income, notably
dividends, payable to non-resident GBC owners on a net basis.

10. To address this issue, a joint Working Group was set up in 2022 to review and validate
data between the Bank of Mauritius and Statistics Mauritius. Following several meetings and
review of the data sources, Statistics Mauritius and the Bank of Mauritius have now agreed on
the treatment and preliminary value of GBC services (i.e., Rs 40,085 million in 2023) that will
be incorporated as export of GBC services in the National Accounts and Balance of Payments
statistics.

6
11. As a result, the change in Exports of Services as per the Expenditure Approach of the
National Accounts is shown in the table below.

Table 3: GDP – Expenditure Approach

Rs million
2021 2022 2023

Published Published Published

Updated Updated Updated
in Sep 2024 in Sep 2024 in Sep 2024

Final consumption expenditure 432,528 432,528 492,025 492,025 532,288 531,232

Gross fixed capital formation 93,820 93,820 112,806 112,806 158,195 140,989
Change in inventories 951 951 3,857 3,857 -1,304 -1,304
Exports of goods & services 211,641 184,153 316,116 282,238 347,837 303,422
Goods ( f.o.b ) 81,992 81,992 105,524 105,524 103,895 103,895
Services 129,649 102,161 210,592 176,714 243,942 199,527
o/w GBC services 69,995 42,507 84,000 50,122 84,500 40,085
Less Imports of goods & services 257,590 257,590 359,834 359,834 367,476 367,476
Statistical discrepancies -2,544 24,945 6,224 39,209 -6,623 34,435
GDP at current market prices 478,807 478,807 571,194 570,301 662,917 641,298

Source: Statistics Mauritius

12. The corresponding changes in the Current Account of the Balance of Payments are as
follows:
Table 4: Current Account of the Balance of Payments
Rs million
2021 2022 2023
Published Published Published
in Sep Updated in Sep Updated in Sep Updated
2024 2024 2024
Current Account -62,641 -62,641 -63,511 -63,511 -29,345 -29,345
Goods and Services -119,582 -77,075 -134,691 -84,569 -114,645 -74,560
Goods -112,321 -112,321 -159,880 -159,880 -162,894 -162,894
Exports 81,992 81,992 105,524 105,524 103,895 103,895
Imports -194,313 -194,313 -265,404 -265,404 -266,789 -266,789
Services -7,261 35,246 25,189 75,311 48,249 88,334
Credit 51,943 94,450 115,694 165,816 144,689 184,774
GBC Services 42,507 50,122 40,085
Transport 3,905 3,905 13,327 13,327 18,242 18,242
Travel 15,253 15,253 64,846 64,846 85,993 85,993
Other Services 32,785 32,785 37,521 37,521 40,454 40,454
Debit -59,204 -59,204 -90,505 -90,505 -96,440 -96,440
Transport -20,578 -20,578 -32,192 -32,192 -26,646 -26,646
Travel -5,210 -5,210 -16,615 -16,615 -22,647 -22,647
Other Services -33,416 -33,416 -41,698 -41,698 -47,147 -47,147
Income 99,582 57,075 115,166 65,044 111,103 71,018
Credit 425,664 425,664 647,535 647,535 379,347 379,347
Debit -326,082 -368,589 -532,369 -582,491 -268,244 -308,329
Current Transfers -42,641 -42,641 -43,985 -43,985 -25,803 -25,803
Credit 13,889 13,889 12,369 12,369 14,369 14,369
Debit -56,530 -56,530 -56,354 -56,354 -40,172 -40,172
Source: Bank of Mauritius

7
13. In view of the complexity of this issue, Statistics Mauritius and the Bank of Mauritius
will seek additional technical assistance from the IMF to further improve both the compilation
and integration of GBC services in the National Accounts and Balance of Payments statistics.

8
 Chapter 2
INVESTMENT AND TRADE

Declining Investment Rate

14. The average annual investment rate (investment as a percentage of GDP) has declined
from 21.9% during the period 2010-2014 to 18.5% during the period 2015-2023. This is a
worrying trend the more so that the average annual private investment rate over the same
periods has declined from 16.6% to 14.1%.

15. Moreover, the bulk of private sector investment was made in the real estate sector.
There is, therefore, a definite lack of investment in productive sectors which explains the
sluggish growth of the emerging sectors and very low job creation.

Skewed Foreign Direct Investment

16. Foreign Direct Investment (FDI) inflows amounted to Rs 33.5 billion in 2022
and Rs 37 billion in 2023.

17. However, the distribution of FDI remains very skewed towards the real estate sector,
which received more than 70% of total inflows in the first semester of 2024. The multiplier
effect of such investments is limited relative to investments in productive sectors. FDI inflows
in sectors such as Agriculture, Manufacturing, Tourism, ICT and financial services represent
less than 15% of total inflows.

Declining Exports of Goods

18. The average annual ratio of exports of goods to GDP which was 22.9% during the
period 2010-2014 declined to 17.4% during the period 2015-2023.

19. In 2021 and 2022, exports of goods in value terms increased but due mostly to the
temporary recovery effect as well as the large depreciation of the rupee.

20. In 2023, export of goods in volume terms actually declined by 12%, indicating a
weakening of the export sector.

Worsening Trade Deficit

21. The sluggish growth in exports coupled with a more pronounced increase in imports of
goods has resulted in a significant worsening of the trade balance from a deficit of 23.4% of
GDP in 2019 to a high of 32.7% in 2022.

9
Current Account
22. On average, the current account registered a yearly deficit of 9.4% of GDP during the
period 2020 to 2023.

23. Most worrying is the fact that the overall balance of payments, which has historically
been in surplus, was in deficit for the last two consecutive years.

10
 Chapter 3
MONETARY POLICY, RESERVES AND THE MAURITIUS INVESTMENT
CORPORATION LTD

Monetary Policy
24. The monetary policy stance adopted by the Bank of Mauritius in the past few years has
not been in line with the macroeconomic fundamentals and interest rate trends in other
countries, particularly the US.

25. As a result of the interest rate policy pursued by the Monetary Policy Committee during
the past three years, the interest rates on USD-denominated financial assets have been
significantly higher than on rupee-denominated financial assets. This situation has accelerated
the depreciation of the rupee and in the process stoked inflation domestically.

26. This approach to monetary policy must be completely revisited.

Exchange Rate
27. Between end-December 2014 and end-November 2024, the rupee has depreciated by
around 46% relative to the US dollar.

28. On a yearly average basis, over the period 2020-2024, the rupee has depreciated
by 5.3% annually. The loss in the value of the rupee has been well above historical average
whereby the rupee depreciated by less than 2% on average annually which was in line with
economic fundamentals.

Graph 2: Exchange Rate (Index - Base Year 2019 = 100)

Exchange Rate - Rs/USD - Index

Upward trend indicates depreciation of rupee
135
130
125
120
115
110
105
100
95
90
2019 2020 2021 2022 2023 Jan-Nov
2024

Source: Statistics Mauritius

11
29. The accelerated depreciation of the rupee has fuelled inflationary pressures. As
highlighted in the 2024 IMF Article IV Consultation Staff Report, the effectiveness of the new
monetary policy framework adopted by the Bank of Mauritius will have to be strengthened to,
amongst others, better align the interbank rate with the key rate and further strengthen monetary
policy transmission.

International Reserves
30. The margin of manoeuvre of the Bank of Mauritius with regard to international reserves
is limited.

31. In fact, the figure of gross official international reserves published by the Bank of
Mauritius (USD 8.4 billion as at end-November 2024) includes balances that are not directly
owned by the Bank such as foreign exchange balances of commercial banks, and loans
contracted by the Bank of Mauritius from international commercial banks.

Mauritius Investment Corporation Ltd

32. In 2020, the then Government set up the Mauritius Investment Corporation Ltd (MIC)
to, among others, assist companies that needed support to ride out the COVID-19 crisis. The
MIC was, however, funded by the Bank of Mauritius, which was and still is its sole shareholder
through a total equity investment of Rs 81 billion. However, the equity investment did not
involve the use of the country’s official reserves. Instead, the entire equity investment
of Rs 81 billion was done through the printing of money by the Bank of Mauritius.

33. The equity investment of Rs 81 billion was made in 4 tranches over the
period August 2020 to June 2021.

34. To date, the MIC has approved total investment of Rs 66.1 billion, of which Rs 57.4
billion have been disbursed, including Rs 25 billion to Airport Holdings Ltd. The MIC has a
remaining balance of Rs 23.6 billion.

35. The MIC was set up at a time when the balance sheet of the Bank of Mauritius was
already in a weak position due to the transfer of Rs 73 billion to Government (Rs 18 billion in
FY 2019-2020 for repayment of external debt and Rs 55 billion in FY 2020-2021 for the budget
support).

36. The printing of money by the Bank of Mauritius to fund the MIC was an irresponsible
act which has had deleterious effects on the monetary system, the more so that the banking
system was already flushed with excess liquidity. It has added to the inflationary pressures in
the economy, increased excess liquidity in the system which could have been very destabilising,
and put additional pressure on the exchange rate of the rupee.

12
37. The setting up of the MIC, its funding through the printing of money and some specific
allocations of the portfolio have exposed the Bank of Mauritius to a significant credit risk and
potential losses in its balance sheet. Any impairment of the investments of the MIC or any loss
in its operations that leads to a reduction in MIC capital will impact negatively on the
profitability and balance sheet of the Bank of Mauritius.

38. Regarding the future of the MIC, the Bank of Mauritius will come up with appropriate
solutions after carrying out an in-depth audit of the situation.

13
 Chapter 4
INFLATION

39. Inflation in Mauritius increased substantially during the past few years reaching a peak
of 10.8% in 2022, mainly due to the increase in international prices as well as the significant
depreciation of the rupee against major currencies. The inflation rate has dropped gradually
to 3.7% for the 12-months ending November 2024, largely due to the base effect of higher
prices in the previous years.

40. Notwithstanding the decline in the inflation rate, the level of prices of goods and
services remain at an elevated level, thereby eroding the purchasing power of the population.

41. Between October 2019 and October 2024, the prices of several essential commodities
have increased significantly, ranging from 10.8% to 114.4% as shown in the table below.

Table 5: Average Prices (Rs) of Selected Commodities

Commodity Oct-19 Oct-24 % Change
Trader's Rice 60.17 80.77 34.3%
Trader's packed flour 17.29 21.00 21.5%
Dry noodle 8.25 9.14 10.8%
Frozen beef 261.04 429.64 64.6%
Frozen Mutton 333.39 527.94 58.4%
Fresh Chicken whole 137.58 210.23 52.8%
Frozen chicken whole 151.44 257.83 70.2%
Corned Beef 81.95 175.71 114.4%
Fresh Beef 461.65 598.51 29.6%
Frozen fish La Perle 223.38 322.78 44.5%
Salted fish Snoek 317.14 385.71 21.6%
Sardines in vegetables oil 22.84 32.81 43.6%
Pilchards tomato sauce 72.57 118.65 63.5%
Tuna solid in oil 47.48 60.08 26.5%
Powdered milk (whole) 176.80 254.10 43.7%
Cheese 68.94 100.13 45.2%
Cooking oil 42.81 71.87 67.9%
Margarine 88.76 118.17 33.1%
Potato 32.83 50.00 52.3%
Garlic 160.00 202.29 26.4%
Broad beans 38.63 45.98 19.0%
Black lentils 19.11 32.32 69.2%
Split peas 15.61 24.12 54.5%
Sugar white 36.08 57.05 58.1%
Baby milk powder 170.00 288.44 69.7%
Baby Cereal 101.32 116.86 15.3%
Salt Refined 12.64 20.96 65.8%
Tea 44.68 69.05 54.5%
Cooking gas 210.00 190.00 -9.5%
Gasolene 44.00 66.20 50.5%
Diesel 35.00 63.95 82.7%
Laundry soap 72.15 150.85 109.1%
Source: Statistics Mauritius

14
42. A comparative analysis of the headline inflation rate in a number of countries shows
that the level of inflation in Mauritius has been relatively higher and it is taking longer to return
to the pre-pandemic level.

43. These countries have been able to control the inflationary pressures as shown in the
table below. Over the period 2022 to 2024, cumulative inflation in Seychelles was only 2.4%
while in Mauritius it was 23%. Seychelles even reported a deflation of 1% in 2023, i.e., a
decrease in the general level of prices of goods and services, indicating that prices have in fact
fallen in absolute terms.

Table 6: Inflation - International Comparison (%)

Country 2021 2022 2023

Mauritius 4.0 10.8 7.0
Botswana 6.7 12.2 5.1
Fiji 0.2 4.3 2.3
Jamaica 5.9 10.3 6.5
Madagascar 5.8 8.2 9.9
Maldives 0.2 2.6 2.6
Seychelles 9.8 2.6 -1.0
South Africa 4.6 6.9 5.9
Source: World Economic Outlook Database, October 2024

44. The fact that inflationary pressures were not effectively contained compelled the
previous Government to award a high salary compensation and introduce various financial
support schemes. These have not only impacted negatively on public finances but also given
rise to a price spiral in the country, thereby affecting the purchasing power of the most
vulnerable groups as well as middle-income households.

45. The debt-fuelled and consumption-driven growth model of the previous Government
has resulted in surging inflation, a sharp depreciation of the rupee and money illusion.

15
 Chapter 5
LABOUR MARKET

46. The unemployment rate, which was 6.3% in 2023, is high considering that most sectors
are facing labour shortages. There are some 37,600 unemployed men and women in the
country while there are 26,700 foreign workers employed across almost all sectors of the
economy. This is due mostly to a lingering problem of skills mismatch on the labour market.

47. Moreover, around 23% of the labour force were underutilised in 2023, up from 20% in
2022. Labour underutilisation comprises the unemployed, the potential labour force, the skills-
related underemployed (i.e., those who have more skills than their job requires) and the time-
related underemployed (i.e., those who were in employment and were available for extra work).

Table 7: Labour Underutilisation

2021 2022 2023

Unemployed 48,400 43,200 37,600
Potential labour force 14,900 1,500 3,900
Skills-related underemployed 48,000 33,900 46,400
Time-related underemployed 93,000 35,000 49,600
Labour underutilisation 204,300 113,600 137,500
% of Labour Force 38.3% 20.2% 23.2%
Source: Statistics Mauritius

48. Female activity rate in Mauritius remains relatively low. In 2023, female activity rate
was 47.5% (16 years and above), well below the average of 67% in OECD countries (15-64
years).

49. Unemployment among women and the youth is also high when compared
internationally. Female unemployment rate stood at 8.7% in 2023 compared to an average of
5.2% among OECD countries.

50. Moreover, women stay unemployed for a longer period of time than their male
counterparts, despite the fact that they may be more qualified. On average, women remain
unemployed for 15 months compared to 10 months for males.

16
 Chapter 6
PRODUCTIVITY

51. The level of productivity for the whole economy in 2023, particularly with regard to
capital and multifactor productivity, still remained below the pre-COVID 2019 level.

52. Capital productivity in 2023, which measures the real value added by one unit of capital
input, was below the 2019 base year level by around 4%.

53. Moreover, multifactor productivity in 2023, which reflects productive efficiency from
better management and improved quality of inputs through training and technology, was under
the 2019 base year level by 0.6%.

Graph 3: Productivity Index (Base Year 2019 = 100)

Productivity Index
110

105

100

95

90

85

80
2019 2020 2021 2022 2023

Labour Productivity Index Capital Pr oductivity Index Multifactor Productivity Index

Source: Statistics Mauritius

54. On the other hand, while labour productivity increased by 1.4% on average annually
from 2019 to 2023, average compensation of employees grew at a higher rate of 7% annually.
This has resulted in an annual increase in unit labour cost by 5.6%.

55. The increase in unit labour cost affects negatively our international competitiveness,
although slightly mitigated by the weakness of the rupee.

17
 Chapter 7
BUDGET DEFICIT

Budget Deficit for FY 2023-2024

56. The actual budget deficit for FY 2023-2024 turned out to be Rs 38 billion,
representing 5.7% of GDP (on basis of updated GDP). This is much higher than the revised
estimates of Rs 27.4 billion, or 3.9% of GDP, published in the 2024-2025 Budget Estimates
document.

57. The higher budget deficit of Rs 10.6 billion is explained by:

(a) a shortfall in revenue by Rs 13.8 billion, mainly under:
• Corporate tax (-Rs 4.8 bn);
• VAT (-Rs 3 bn);
• Excise duties on alcoholic and tobacco products (-Rs 1.3 bn);
• Land transfer tax (-Rs 0.9 bn);
• Registration duty on transfer of immovable property (-Rs 0.7 bn);
• Dividends mainly from AHL and FSC (-Rs 0.9 bn);
• Passenger fee on air tickets (-Rs 0.4 bn); and
• Individual income tax (-Rs 0.4 bn);

(b) which was partly offset by lower expenditure of Rs 3.1 billion, mainly under:
• capital expenditure and transfers (-Rs 1.2 bn);
• staff and operations cost (-Rs 0.7 bn);
• interest payments (-Rs 0.6 bn); and
• grants to public bodies such as the RRA and Mauri-Facilities (-Rs 0.3 bn).

Budget Deficit Outlook for FY 2024-2025

58. On the basis of the budget performance in FY 2023-2024 and the first 5 months of the
current financial year, it is expected that, on a no-policy change basis, the budget deficit for
FY2024-2025 would amount to around Rs 48.5 billion, as against the estimates of Rs 26.8
billion.

59. The budget deficit to GDP ratio for FY 2024-2025 is expected to reach around 6.7%,
compared to the budget estimates of 3.4%.

18
60. The higher budget deficit of Rs 21.7 billion is explained by the following factors:
(a) lower than expected revenue by Rs 16.7 billion, mainly due to:
• the shortfall in recurrent revenue in FY 2023-2024 that will recur in the current
financial year (-Rs 13.5 bn). The 2024-2025 Budget figures were worked out
on the basis of the revised estimates for FY 2023-2024 published in the 2024-
2025 Budget Estimates document;
• lower excise duties on motor vehicles & petroleum products (-Rs 1 bn);
• lower dividends from AHL and FSC (-Rs 2 bn), given their current financial
situation;
(b) higher expenditure than estimated by Rs 5 billion, resulting mainly from:
• policy decision to award salary relativity adjustment (+Rs 1.5 bn) and increase
the allowance for Free Travel Scheme (+Rs 350 m);
• higher provision required for:
o basic retirement pensions (+Rs 325 m);
o CSG Income and Child Allowances (+Rs 1.3 bn);
o payment of costs to Patel Engineering Ltd (+Rs 310 m);
o support to bus operators (+Rs 300 m);
o medical supplies and other operating costs (+Rs 450 m);
o grants to public bodies financially dependent on Government (+Rs 1.4
billion);
o interest payments as proposed reform of the primary market and the
expected savings therefrom are not likely to materialise in this financial
year (+Rs 1.5 bn);
• higher transfers to Special Funds (+Rs 2 bn) particularly following the policy
decision to support SMEs for payment of the salary relativity adjustment; and
• partly offset by lower capital expenditure (-Rs 2.8 bn) because of delay in
project implementation.

Borrowing Requirements
61. In recent years, Government borrowing requirements have been far above the budget
deficit.

62. Government borrowing requirements, which is more relevant from the perspective of
sound public finances, have been surging in recent years. The higher the borrowing
requirements, the higher will be the increase in Government debt.

63. The surge in the Government borrowing requirements has been caused mainly by loans
extended by Government to as well as equity injection in public bodies.

19
64. Government borrowing requirements for the financial year 2024-2025 is expected to
reach a high of around 8.2% of GDP, i.e., well above the 4.8% that was published in the Budget
document.
Table 8: Statement of Government Operations
Rs million
2023-2024 2024-2025
Estimates Rev. Est. Actual Estimates Rev. Est.
Total Revenue 179,160 174,751 160,998 210,500 193,839
o/w Taxes 156,241 153,545 141,133 182,640 167,627
Total Expenditure 200,178 202,127 199,029 237,319 242,320
Budget Deficit -21,018 -27,376 -38,031 -26,818 -48,481

As % of GDP -2.9% -3.9% -5.7% -3.4% -6.7%

Net Acquisition of Financial Assets 3,619 4,415 3,928 11,510 11,400
Adjustment for difference in cash and
-325 -1,100 -1,243 -300 -300
accrual interest
Government Borrowing Requirements 24,312 30,691 40,716 38,028 59,580
As % of GDP 3.4% 4.4% 6.1% 4.8% 8.2%

Source: Ministry of Finance

Special Funds
65. The available cash balances in the Special Funds have depleted significantly from
around Rs 36.8 billion as at end-June 2022 to only Rs 14.1 billion as at end June 2024, and
with almost no funds available by end June 2025 for financing projects and schemes.

66. For FY 2024-2025, a total amount of Rs 10.3 billion has been voted to be transferred to
the Special Funds. In view of the expenditure commitments for the different projects and
schemes, it is now expected that an additional sum of Rs 2 billion will be required. This will
require a Supplementary Appropriation by the National Assembly.

67. With this additional transfer of Rs 2 billion, it is expected that total cash balances in the
Special Funds would be further reduced to only Rs 1.6 billion by end June 2025.

68. Going forward, additional funds will have to be transferred to the Special Funds in order
to finance the projects and schemes currently being implemented under the Funds. This will
negatively impact the Consolidated Fund, thus putting additional pressures on public finances.

20
69. The financial position of the main Special Funds is summarised in the table below:

Table 9: Special Funds

Rs million
1 1 1 1 1
NRF PDF NEF CSF PRF Total
Opening balance – July 2024 141 13,446 478 - 69 14,134
Add: Receipts 4,806 1,475 8 3,252 2,700 12,241
- Transfers from Budget (as Voted) 4,600 - 3,200 2,500 10,300
- Other Revenue 206 1,475 8 52 200 1,941
4,947 14,921 486 3,252 2,769 26,375
Less: Payments 7,427 13,461 921 1,747 3,219 26,775
-2,480 1,460 -435 1,505 -450 -400
Add: Additional Transfers required 2,500 500 -1,500* 500 2,000
Closing Balance – June 2025 20 1,460 65 5 50 1,600
* Lower amount being transferred as expenditure for some projects are being met under the
NEF and PDF.
Source: Ministry of Finance

Budget Deficit and Government Borrowing Requirements consolidated with Special

Funds
70. Significant Government operations are being carried out through the Special Funds. In
order to have a complete picture of the fiscal situation, an exercise has been carried out to
estimate the budget deficit and Government borrowing requirements if there were no Special
Funds, i.e., if all expenditures in the Special Funds were made in the Consolidated Fund.

71. On that basis, given the expenditure commitments taken in the Special Funds, it is
estimated that the budget deficit of 6.7% of GDP and the Government borrowing requirements
of 8.2% for FY 2024-2025 would be around 1.7 percentage points higher, i.e., 8.4% and 9.9%,
respectively.

CSG Budgeting
72. The Contribution Social Généralisée (CSG) was introduced in September 2020. It
replaced the National Pension Fund (NPF) contributions. All collections under CSG are
credited to the Consolidated Fund. The CSG has become unsustainable.

73. In fact, since FY 2023-2024, the payments effected under the CSG far exceed the
contributions being collected by Rs 3.2 billion. This gap is expected to increase to Rs 9 billion
in FY 2024-2025, putting extreme pressure on public finances.

1
NRF – National Resilience Fund; PDF – Projects Development Fund; NEF – National Environment
Fund; CSF – Climate and Sustainability Fund; PRF – Poverty Reduction Fund

21
74. The table below shows the CSG contributions and payments, and the financing gap
which is increasing over time.

Table 10: Contribution Social Généralisée (CSG) Budgeting

Rs million
2020/21 2021/22 2022/23 2023/24 2024/25
Receipts 5,247 8,348 9,508 10,902 12,900
CSG - Public Sector Employees 1,281 262 467 485 530
CSG - Private Sector Employees 1,400 2,008 2,323 2,700 3,245
CSG - Public Sector Employers 2,562 1,930 1,917 2,110 2,355
CSG - Private Sector Employers 3 4,061 4,647 5,400 6,520
CSG - Self-Employed - 87 154 207 250

Payments 2,562 1,943 8,914 14,111 21,859

CSG Income Allowance 4,308 7,314 10,980
CSG Retirement Benefits (Social Benefits) 2,208 2,843 3,575
Industrial Injury Benefit 13 21 19 25
Disability Allowance 2 18 33
CSG Child Allowance 868 1,250
Independence Scheme 451 350
CSG School Allowance 2,153
Maternity Allowance 75
Pregnancy Care Allowance 50
Revenue Minimum Garantie Allowance 360
Equal Chance Allowance 100
Allowance - Children with Disabilities 3
Government CSG Contribution 2,562 1,930 1,917 2,110 2,355
Public Employees CSG Contribution 458 487 550
Net Position 2,685 6,406 595 -3,209 -8,959
Source: Ministry of Finance

22
 Chapter 8
PUBLIC SECTOR DEBT

Public Sector Gross Debt

75. Public sector debt is composed of disbursed loans and debt securities of Government,
extra budgetary units, local authorities (municipalities, district councils and Rodrigues
Regional Assembly) and public enterprises (including SPVs). Public enterprises debt, both
guaranteed by Government and non-guaranteed, are accounted for in public sector debt.

76. Currently, Government securities being held by non-financial public sector entities,
such as the Mauritius Ports Authority and the Projects Development Fund, are being netted
out in the computation of the public sector debt figures.

77. In line with international best practices, the IMF has highlighted that such netting out
should be done after the computation of public sector gross debt, which gives a true picture of
the actual level of public sector debt.

78. Moreover, the publication of the public sector net debt figure, i.e., by netting out cash
and cash equivalent and equity investment held by Government and non-financial public sector
bodies in private entities from the gross debt figure, gives an erroneous picture of the actual
debt situation.

79. The table below shows that the actual public sector gross debt figures are higher than
the debt figures as well as the net debt figures currently being published.

Table 11: Public Sector Debt

Net* PSD as PSD as PSD as

Actual PSD Actual PSD
published published published

Rs billion % of GDP
Dec-14 - 237.7 238.0 59.4% 59.5%
Jun-16 - 273.4 274.4 63.0% 63.2%
Jun-17 - 288.0 290.1 62.6% 63.0%
Jun-18 - 298.1 300.2 61.3% 61.8%
Jun-19 - 320.7 325.2 63.1% 64.0%
Jun-20 322.2 381.8 387.2 81.0% 82.2%
Jun-21 345.0 419.4 432.2 91.9% 94.7%
Jun-22 385.5 449.3 464.4 86.0% 88.9%
Jun-23 427.7 495.6 513.4 80.2% 84.7%
Jun-24 494.4 546.3 559.1 77.6% 83.4%
* Computed as from March 2020

Source: Ministry of Finance

23
Increase in Debt since 2014
80. The level of public sector gross debt has increased from Rs 238 billion as at end-
December 2014 to Rs 559.1 billion as at end-June 2024, i.e., more than doubled over a decade
or a surge of around Rs 32 billion on average annually.

81. One of the main factors contributing to the significant increase in the debt level is the
compensation that the previous Government has had to pay in relation to policy decisions in
various sectors. In fact, a total of Rs 26.9 billion was paid in respect of the ex-BAI, Betamax
and Neotown cases.

82. Some Rs 29.6 billion were disbursed for COVID-19 related expenditure.

83. The significant depreciation of the rupee over the period led to an increase in the value
of the external debt of Government by around Rs 19.8 billion, thereby increasing the public
sector debt.

24
84. The table below highlights the main contributors to the increase in the debt level.

Table 12: Main Contributors to the Increase in Public Sector Debt

Rs million
Dec 2014 to Jun 2024

Public Sector Debt as at end-December 2014 238,033

Public Sector Debt as at end-June 2024 559,070
Increase in Public Sector Debt 321,037

o/w Increase in Government Debt 275,018

of which
Equity Injection: 20,339
National Property Fund Ltd (NPFL) - Ex-BAI 9,080
NPFL - National Insurance Co. Ltd 5,700
MauBank Holdings Ltd 5,559
Expenditure: 225,362
Increase in Basic Pensions (Cumulative 2014-2024) 101,000
COVID-19 related Expenditure 29,600
Compensation paid in Betamax Case 4,600
Compensation paid to Patel Engineering Limited 1,893
Implementation of PRB Report (Cumulative 2016-2024) 33,000
Salary Compensation (Cumulative 2015-2024) 23,050
Social Housing Project (8,000) 17,000
Flood Mangement Programme 5,863
Home Ownership Scheme/Home Loan Payment Schemes 3,419
General SDR Allocations (IMF) 8,100
Impact of Depreciation of MUR on External Debt 19,800

o/w Increase in Public Enterprise Debt 46,019

of which
Metro Express Ltd 15,885
National Housing Development Co. Ltd (Social Housing Units) 1,028
MauBank Holdings Ltd (Equity Injection in MauBank Ltd) 7,858
Mauritius Telecom Ltd (Safe City Project) 3,506
Development Bank of Mauritius Ltd (LOC from BOM - Loans to
COVID-19 Impacted SMEs) 4,412
Central Electricity Board (Various Projects) 6,851
National Property Fund Ltd 3,500
State Trading Corporation (Short term credit facilities icw payment for
petroleum products) 978
Source: Ministry of Finance

25
Public Sector Gross Debt as at end June 2024
85. Public sector gross debt as at end June 2024 was higher by Rs 20.2 billion, amounting
to Rs 559.1 billion as against the revised estimates (without the Consolidation adjustment for
Government securities held by non-financial public sector entities) of Rs 538.9 billion. This is
mainly explained by:
(a) the higher budget deficit (+Rs 10.6 bn);
(b) higher securities issued due to mismatch in timing of payments and receipts of tax
revenues (+Rs 6.3 bn); and
(c) higher public enterprise debt (+Rs 3.3 bn), particularly for the CEB and Air
Mauritius Ltd.

86. Thus, the public sector debt to GDP ratio was higher at 83.4% as at end June 2024
against the adjusted revised estimates of 76.5%. This figure was already above the statutory
debt ceiling of 80% set by the then Government.

Public Sector Gross Debt Outlook for end June 2025

87. For the year ending June 2025, it is estimated that public sector debt would increase to
Rs 612.8 billion compared to the budget estimate (without the Consolidation adjustment for
Government securities held by non-financial public sector entities) of Rs 574.5 billion.

88. The debt figure is on a no-policy change basis, i.e., does not include the financial
implications of any new expenditure measures.

89. The higher public sector debt is mainly explained by:

(a) the higher debt level as at end-June 2024 (+Rs 20.2 bn);
(b) the higher budget deficit expected in FY 2024-2025 (+Rs 21.7 bn); and
(c) which would be partly offset by use of available cash balances (-Rs 3.6 bn).

90. As a percentage of GDP, the debt ratio would increase further to 84.5% from 83.4% as
at end June 2024.
Graph 4: Public Sector Debt
Public Sector Debt (% of GDP)
100
90
94.7
80 88.9
82.2 84.7 83.4 84.5
70
60
63.2 63.0 61.8 64.0
50 59.5

40
30
20
10
0
6

5
14

/1

/1

/1

/1

/2

/2

/2

/2

/2

/2
20

15

16

17

18

19

20

21

22

23

24
20

20

20

20

20

20

20

20

20

20

Source: Ministry of Finance

26
 Chapter 9
CONTINGENT LIABILITIES

91. The precarious financial situation of some public bodies and SPVs represent potentially
significant contingent liability risks to Government. These risks, if not properly addressed will
further increase the debt burden of Government. These fiscal risks are detailed out below.

Metro Express Ltd

92. The Metro Express Ltd (MEL) has contracted a loan of USD 340 million (Rs 15.98
billion) under the Line of Credit from India. Payment of interest on the loan started in FY
2022-2023. Up to June 2024, Government has granted a total amount of Rs 1.1 billion to MEL,
as loan, for payment of interest and meeting part of its operational expenses.

93. The annual repayment of the capital of the loan of around Rs 900 million will start as
from FY 2026-2027. Thus, a total of around Rs 1.2 billion will be required annually for capital
and interest payments on the loan. Additional funds will also be required for the operational
costs of MEL.

94. Given its current financial situation, MEL’s will not be able to meet the cost of servicing
the loan as well as meet all its operational costs.

New Social Living Development Ltd

95. The New Social Living Development Ltd (NSLD), a subsidiary of National Housing
Development Co. Ltd (NHDC), is responsible for building 8,000 social housing units. The
NSLD has appointed 13 contractors for the construction of these housing units, which are
expected to be completed by mid- 2025.

96. The total construction cost of the housing units is estimated at Rs 29.3 billion, inclusive
of costs related to other infrastructural works, hiring of consultants and land acquisition. Out
of this amount, Rs 15.3 billion represent Government subsidy and is being paid from the
Projects Development Fund (PDF). Cost of land acquisition, consultancy and offsite
infrastructure works amounting to Rs 6.8 billion are also being borne by the PDF.

97. Pending the receipt of the contributions from the beneficiaries, a bridging finance of
Rs 7.2 billion will be contracted from institutional investors for the completion of the
construction works. This sum will be repaid from the contributions of beneficiaries. Any
shortfall will have to be borne by Government.

27
Central Electricity Board
98. Following the increase in electricity tariffs in February 2023, the deficit of the Central
Electricity Board (CEB) has decreased from Rs 4.88 billion in FY 2022-2023 to Rs 243.3
million in FY 2023-2024. However, as at end-September 2024, the CEB has a bank overdraft
of Rs 5.49 billion.

99. To meet its financial obligations towards the State Trading Corporation for the purchase
of heavy fuel oil, the CEB had recourse to overdraft facilities in USD and deal in Swaps
instruments. The CEB has contracted SWAP arrangements for a total amount of USD 243.5
million and EUR 3.9 million as at 15 November 2024.

Deficit in the STC Subsidy Account

100. The State Trading Corporation (STC) is subsidising the retail price of rice, flour
and LPG. The Subsidy Account for these products was in deficit of around Rs 1.5 billion in
October 2024. The deficit is expected to increase to Rs 2.15 billion by end June 2025.

101. The deficit is recorded as a receivable from Government in the books of the STC.

Price Stabilisation Account

102. The STC operates a Price Stabilisation Account (PSA) each for Mogas and Gas Oil
with a view to mitigating the effects of fluctuations in international prices on domestic retail
prices.

103. In October 2023, Government injected Rs 250 million in the PSA of Mogas to be able
to reduce its retail price from Rs 72.10/litre to Rs 69/litre.

104. As at 13 November 2024, the total deficit in the PSA stood at Rs 3.41 billion.

National Property Fund Ltd

105. The National Property Fund Ltd (NPFL) contracted a loan of Rs 3.5 billion from the
Bank of Mauritius to repay the victims of the ex-BAI, namely the policy holders of Super Cash
Back Gold (SCBG) and investors of the Bramer Asset Management Ltd (BAML). The loan,
which is guaranteed by Government, is repayable as a bullet payment on 30 June 2027.

106. NPFL does not have the financial resources to repay the loan unless it disposes of the
National Insurance Company. Otherwise, Government will have to provide funds for the
repayment of the loan.

28
Central Water Authority
107. For FY 2023-2024, the Central Water Authority (CWA) recorded a deficit of Rs 300
million.

108. As at 30 June 2024, the total amount of loans outstanding to Government was Rs 3.43
billion. In addition, there was around Rs 2.1 billion of arrears of principal, interest and penalty
due by the CWA to Government. The CWA also had a bank overdraft of Rs 149 million as
at 30 June 2024.

Wastewater Management Authority

109. For FY 2023-2024, the Wastewater Management Authority (WMA) registered a deficit
of Rs 527 million. Since 2013, the WMA has not repaid its obligations towards Government.

110. As at 30 June 2024, total arrears of principal, interest and penalty due by the WMA to
Government amounted to around Rs 2.15 billion and the total amount of loans outstanding
stood at Rs 3.46 billion. In addition, the Authority had a bank overdraft of Rs 11 million as
at 30 June 2024.

Mauritius Multisports Infrastructure Ltd

111. The Mauritius Multisports Infrastructure Ltd was set up for the implementation of the
Cote D’Or National Sports Complex on a fast-track basis. Government, being the major
shareholder, has invested Rs 5.28 billion in terms of equity participation in the Company for
the construction of the Complex. The equity injection was financed from Loan and grant from
China (Rs 1.78 billion), Loan from Saudi Fund for Development (Rs 947 million) and
Government funds (Rs 2.6 billion).

112. For FY 2024-2025, MMIL received a recurrent grant of Rs 101 million from
Government to meet its operating expenses, out of which approximately Rs 15 million relates
to the payment of license fees to Liverpool Football Club International Academy. MMIL is
expecting a shortfall in revenue of around Rs 19 million in FY 2024-2025.

Air Mauritius Ltd (Subsidiary of Airport Holdings Ltd)

113. Air Mauritius Ltd (MK) is fully owned by Airport Holdings Ltd (AHL). As at
end June 2024, MK had an accumulated deficit of EUR 331.1 million (Rs 16.5 billion)
resulting in a negative shareholder’s equity of EUR 208.8 million (Rs 10.4 billion). As per the
Companies Act 2001, MK is deemed insolvent.

114. The accumulated deficit of MK has worsened since 2020, following the impact
of COVID-19 on the aviation sector and significant impairment losses on the sale of aircrafts.

115. There is need for capital injection into Air Mauritius Ltd through the AHL.

29
National Transport Corporation
116. The National Transport Corporation (NTC) is in a precarious financial situation.
Government had to intervene in March 2023 by providing a loan of Rs 100 million to help it
clear its outstanding operating expenses.

117. The financial distress is mainly due to its ageing bus fleet hindering optimal
performance, causing it to operate with a reduced fleet on a daily basis thereby cutting down
its revenue.

118. It is imperative for the NTC to renew its bus fleet at the earliest possible so that it can
redress its financial situation and improve its transport services. The NTC will thus need
financing support to invest in the acquisition of new buses.

Casinos of Mauritius
119. The Casinos of Mauritius are subsidiaries of the State Investment Corporation (SIC).
The SIC meets all monthly shortfall in cash requirements by the casinos through provision of
Corporate Guarantee for overdraft facilities granted by MauBank Ltd and also through its own
funds.

120. The financing granted to the Casinos by the SIC and Government are as follows-
o SIC Own Funds (Up to August 2024) - Rs 1.60 billion.
o Post COVID-19 (SIC Corporate Guarantee) - Rs 340 million
o Government Injection (through SIC) - Rs 85.48 million
th
(Payment of 14 month bonus for 2019-2023)
o Disposal Proceeds - Rs 120 million

121. Total long-outstanding arrears for all Casinos as at October 2024 amounted to Rs 141
million, including Rs 19 million as arrears of backpay for CSG and pension contributions.

Airport of Rodrigues Ltd

122. Airport of Rodrigues Ltd (ARL) is fully owned by Airport Holdings Ltd (AHL). As at
end June 2024, ARL had an accumulated loss of Rs 781.2 million resulting in a negative
shareholder’s equity of Rs 41.9 million. As per Companies Act 2001, ARL is deemed insolvent.

123. Since 2019, ARL has been incurring operational losses of around Rs 80 million
annually. During FY 2023-2024, ARL received Rs 53 million as Grant from RRA for OPEX
and Rs 58 million as cash advance (treated as shareholder loan) from Airport Holdings Ltd
(AHL) for CAPEX. As at 30 June 2024, the shareholder’s loan from AHL stood at Rs 78.2
million and loan from AML amounted to Rs 171.3 million.

30
Mauritius Post Ltd
124. The Mauritius Post Ltd (MPL) generates its revenue from Postal Services. In
FY 2023-2024, the MPL incurred losses of Rs 83 million. In addition, the MPL has a
shareholder’s deficit and a pension deficit amounting to around Rs 2 billion and Rs 2.6 billion,
respectively.

Statutory Bodies Pension Funds

125. The statutory bodies defined benefit pension funds, governed by the Statutory Bodies
Pension Fund Act, have accumulated a significant level of actuarial deficits over time
amounting to around Rs 47 billion as at end June 2024. Actuarial deficit arises when it is
projected that the assets of the funds may not be sufficient to meet the pay-out in the long term
and under a particular set of valuation assumptions.

126. The pension funds currently do not have a cash deficit, i.e., they are presently able to
meet their pension obligations. However, in view of the current conditions, the financial
position of the funds may deteriorate. It is, therefore, crucial to take appropriate measures to
ensure the financial sustainability of the pension funds.

31
 PART 2

CONSTRAINTS AND
CHALLENGES

32
 Chapter 10
STRUCTURAL CONSTRAINTS FACING THE ECONOMY

127. Several structural constraints have emerged during the past decade, which are
impacting negatively on Mauritius’s long-term growth potential. The main constraints are
summarised below.

Labour Market and Other Resource Constraints

Labour Market
128. The most binding constraint on our future development lies on the labour market. Our
labour force growth is almost stagnating and is forecast to become negative in the near future
as a result of the new demographic dynamics. Addressing this issue is going to be one of the
top priorities of Government.

129. The labour constraint is both quantitative and qualitative.

130. Some 17,500 (48%) of the unemployed do not have the Cambridge School Certificate
or equivalent, and among them 2,100 have not passed the Primary School Achievement
Certificate/Certificate of Primary Education or equivalent. Moreover, only about 20% of our
labour force have post-secondary education.

131. There is also a gender issue on the labour market. Female unemployment rates remain
elevated in spite of low women participation rate.

132. Youth unemployment is also unacceptably high.

133. There is also a high level of labour underutilisation that adds to structural constraints
on the labour market.

134. In recent years, the labour market constraints have become more acute because of the
high brain drain. A high percentage of Mauritian graduates are leaving the country to work
abroad.

Water Supply
135. Water supply is a critical component for the successful implementation of development
projects and for improving the quality of life of the population. Today the shortage and
unreliable supply of water stand as a major impediment to development which must be
addressed urgently.

33
Energy
136. Energy has become another major constraint on socio-economic activities. It weighs
very heavily on our external balances since almost 90% of our energy needs are imported.
Moreover, it makes Mauritius highly dependent on imports for such a vital resource. It is
imperative to speed up the production of local renewable energy.

Low productivity and inefficiency of the Port

137. Crane and ship productivity growth in the port of Mauritius has stagnated in recent
years such that the port has now been surpassed by other regional competing ports. Moreover,
ship productivity, measured by time spent at the port, has hovered around 45 hours, which is
considered to be high by international standards.

138. The main causes of low productivity are a shortage of qualified and trained technical
labour, and the inability to come up with a proper manning structure in order to optimise the
use of existing infrastructure, as well as the fact that 2 out of the 8 existing cranes are out of
use. Due to low port productivity, there is a high risk of shipping lines skipping Port Louis for
other more productive ports in the region. This will lead to increased transit times for cargo
containers to reach Mauritius thereby increasing shipping cost.

Digital Infrastructure and Ecosystem

139. Despite progress in digitalising public services, such as the Corporate and Business
Registration Information System, Info-Highway, MRA e-filing, and the National E-Licensing
System, Mauritius still lacks critical digital infrastructure. The absence of key systems such as
GIS technologies, more data centres, an integrated single window for trade, and a
comprehensive maritime single window limits the country's potential to fully optimise digital
transformation and enhance ease of doing business.

Institutional Failures
140. Mauritius has unfortunately witnessed in recent years a conspicuous weakening of its
institutions. It is widely agreed that institutional strengths have been behind the economic
progress of Mauritius since independence. Due to bad governance, Mauritius has lost this
major advantage. The institutional strength of Mauritius needs to be reconstructed.

141. Coordination across various sectors and government institutions need to be reinforced.
Proper assessment of the financial, economic and social impact of Government decisions and
policy measures should be carried out to ensure evidence-based decision making and avoid
unintended costs.

142. Overlapping functions across institutions hamper effective implementation of

Government projects and programmes. Many government programmes lack robust M&E
frameworks, leading to suboptimal outcomes and inefficient use of public resources. These
issues hinder innovation and accountability in public service delivery.

34
Administrative and Bureaucratic Constraints
143. Bureaucracy and inefficiencies in licensing processes are pervasive. They are thus
severe constraints on investment decisions and business operations. Moreover, rising business
costs, particularly in energy, labour and compliance are eroding competitiveness. Dispute
resolution is ineffective, as highlighted by the 2024 World Bank B-READY Report. There is
also a lack of critical digital infrastructure that limits the country's potential for full digital
transformation and improved ease of doing business. All these issues must be addressed
urgently.

35
 Chapter 11
CHALLENGES OF CLIMATE CHANGE AND ADAPTATION

144. Mauritius is vulnerable to the impacts of climate change due to its small land area, low-
lying coastal regions and reliance on natural resources. Some key impacts of climate change
in Mauritius are as follows:
(a) rising sea levels threaten coastal areas, infrastructure and freshwater resources.
Low-lying regions, including densely populated areas and tourist destinations, are
at risk of erosion, flooding and saltwater intrusion;
(b) Mauritius is susceptible to more frequent or intense cyclones that can cause
significant damage to infrastructure, agriculture and coastal ecosystems;
(c) changes in rainfall patterns and increased evaporation rates due to higher
temperatures will affect freshwater availability and impact on agriculture,
drinking water supplies and biodiversity;
(d) climate change threatens Mauritius' unique biodiversity, including endemic plant
and animal species through habitat loss, coral bleaching and invasive species; and
(e) climate-related risks such as beach erosion, coral reef degradation and extreme
weather events will impact negatively on the tourism sector and the economy.

145. As per the commitments at COP, Mauritius has pledged for a sustainable and low-
carbon economy through the achievement of the following targets by 2030:
(a) a reduction of 40% in greenhouse gas emissions;
(b) increasing the share of renewable energy in the electricity mix to 60%;
(c) phasing out of coal in electricity production;
(d) achieving energy efficiency gains of 10%; and
(e) promoting a circular economy aiming at 70% landfilled waste reduction.

146. Greenhouse gas (GHG) emissions increased by 5.3% from 2022 to 2023. In 2023, the
energy sector accounted for the largest share of emissions (78.8%), followed by the waste
sector (10.2%).

147. In addition, the share of renewable energy has been declining for the past few years
both in absolute and relative terms, from 24% (688 GwH) in 2020 to 17.6% (574 GwH)
in 2023. This resulted mainly from a decrease in electricity generation from bagasse, adverse
climatic conditions affecting generation from wind and solar as well as an increase in demand.

148. Mauritius has already worked out its Nationally Determined Contribution (NDC) report
and an NDC Action Plan for the implementation of mitigation and adaptation measures in key
sectors.

36
149. On mitigation, the key sectors are energy, transport, waste, industrial processes and
product use, agriculture and land use, land use change and forestry. The adaptation sectors
include agriculture, coastal zone, fisheries and blue economy, health, infrastructure, tourism
and water. The Plan also caters for cross-cutting sectors namely disaster risk reduction, gender,
social security and education.

150. The total financial needs to implement the NDC targets are estimated at USD 6.5
billion (Rs 300 billion), of which USD 2 billion for mitigation measures and USD 4.5 billion
for adaptation actions.

151. The shares for the unconditional and conditional contributions for the USD 6.5 billion
are as follows:
(a) USD 2.3 billion (35%) unconditional contribution from Government and the
private sector; and
(b) USD 4.2 billion (65%) conditional contribution from international sources and
donor agencies.

152. Government will have to mobilise significant financial resources to fund the
implementation of the mitigation and adaptation measures. There are opportunities to tap into
international climate finance, either through grants or concessional loans. In addition, there
are different carbon market mechanisms whereby Mauritius can sell its carbon credits.

153. Moreover, there is need for greater private sector participation in green projects
particularly aimed at adapting to climate change.

37
 Chapter 12
SECTORAL CHALLENGES

154. The main sectors of the Mauritian economy are facing a number of challenges impeding
their potential development and growth. These challenges include labour shortage, lack of new
investments, slow adoption of new technologies and limited markets. The challenges being
faced by the main sectors are summarised below.

Agricultural Sector
155. The key challenges facing the sector are as follows:
(a) High production costs: The cost of production has increased significantly due to
a surge in prices of inputs such as seeds, fertilizers, pesticides and labour, while
yields have remained stagnant;
(b) Climate change: Mauritius is particularly vulnerable to the impacts of climate
change, which threatens agricultural productivity;
(c) Water scarcity: Reliable irrigation is essential for maintaining productivity, and
there is a growing need for consistent and effective water management to prevent
crop failures;
(d) Labour shortages: The agricultural sector is grappling with a shortage of
workers;
(e) Aging workforce: The declining interest among youngsters in pursuing careers
in agriculture underscores the growing challenge of an aging farming population;
(f) Security issues: The rise in theft and security concerns, exacerbated by broader
social challenges, continues to affect agricultural operations and farm security;
(g) Foreign investment: Attracting foreign investment in agriculture has been
challenging, due to the small-scale farming nature of the Mauritian agricultural
sector. The long-term nature of agriculture, where crops and livestock take time
to mature, deters investors seeking quicker returns;
(h) Modern agricultural practices: Adoption of new technologies such as sheltered
farming, vertical farming, hydroponics and aquaponics, which have greater
returns and require less pesticides and fertilisers, has registered a slow
progression despite different incentive schemes; and
(i) Food security: Food security is a pressing issue, with almost 80% of current food
consumption being imported. In addition, a significant percentage of fertilizers
used in agriculture is also imported, further highlighting the vulnerabilities in the
food production system.

38
Ocean Economy
156. Mauritius has an Exclusive Economic Zone of 2.2 million sq km. The vast untapped
resources in the EEZ makes the Ocean Economy as one of the major future drivers of economic
growth. However, development of the sector has been slow due to the following challenges:
(a) Climate change: The effects of climate change such as rise of sea-level, intense
tropical cyclones, changing patterns in temperature and rainfall, and ocean
acidification are already being felt. Such effects have adverse impacts on the
smooth development of the Ocean Economy;
(b) High investment costs: Often perceived as too risky by financial markets,
activities in the Ocean Economy come with high cost of capital;
(c) Availability of skills set: Unavailability of local skilled labour and technical
expertise;
(d) Changes in consumption and trade patterns: Market changes, consumer
preferences and evolving industry trends create new needs for different
products; and
(e) Surveillance of the EEZ: There are limited resources for the effective
monitoring and surveillance of the EEZ with a view to safeguarding the resources
in the waters against illegal and suspect activities as well as overfishing.

Manufacturing Sector
157. The manufacturing sector contributes to around 12% of GDP and some 15% of total
employment. Growth in the sector has slowed to around 0.7% on average annually over the
past ten years compared to 2.5% in previous years. The main challenges being faced by the
sector, impeding its transformation into a modern, high-tech sector, are as follows:
(a) Inadequate industrial infrastructure: Limited plug and operate industrial parks
that can cater for capital intensive industries;
(b) High cost of production: Increase in cost of production (labour, utilities, freight)
affecting cost competitiveness;
(c) Shortage of skilled labour: Difficult and lengthy process related to the
recruitment of foreign labour. Deficiency in vocational, technical and
professional education resulting in lack of resources to operate in new industries;
(d) Limited market: Lack of market intelligence on traditional, emerging and
African markets. Limited budget for continuous and consistent export promotion
events to maintain existing and secure new clients;
(e) Connectivity issues: Limited shipping lines operating in Mauritius restrict
connectivity with countries of exports. Poor port productivity resulting in longer
lead times and higher port handling charges;
(f) Low technology adoption: Limited support in terms of matching grants to
encourage industries to invest in new technologies and production methods; and

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 (g) Low productivity of SMEs: Need to improve productivity and efficiency in
SMEs to make them more competitive for export markets.

Tourism Sector
158. The direct contribution of the tourism industry to GDP is estimated at around 8.7%
in 2023. Taking into account the indirect and induced activities, the sector has a significant
bearing on the overall performance of the economy. There is, therefore, need to address the
following key challenges being faced by the sector:
(a) Labour shortage: Following the COVID-19 Pandemic, the sector is facing an
acute labour shortage, hindering its ability to meet its manpower requirement to
steer its future development;
(b) Limited air connectivity: Although Mauritius is well connected to key markets
like Europe, India and South Africa, limited flight frequency, high airfares and
competition from other destinations can deter potential visitors;
(c) Expensive destination: Mauritius' positioning as upmarket destination renders it
expensive and not accessible to travellers particularly from emerging economies
or middle-income brackets. A new segment could be developed in parallel to
cater for such tourists;
(d) Shortage of tourist accommodation: There is a limited supply of mid-range and
budget-friendly options, making it difficult to cater to a wider array of tourists,
particularly those from emerging markets;
(e) Lack of planning for hotel development: The non-availability of a clear and
comprehensive repertoire of approved sites for hotel development makes it
difficult for developers to find suitable and available land for new hotel projects,
limiting the expansion of the accommodation infrastructure needed to meet
growing demand;
(f) Unregulated tourist accommodations: The increasing number of unregulated
tourist accommodations poses a growing challenge for the tourism sector in
Mauritius;
(g) Heavy reliance on traditional markets: Overdependence on traditional markets
limits the sector's resilience and growth potential by attracting a broader and more
diverse range of international visitors;
(h) Limited tourism products: The variety of tourism products currently on offer is
limited and does not reflect new trends and demands. There is need to expand the
product range into eco-tourism, hiking and trekking, golf and other sporting
events, food festivals and cultural events, kite surfing and other sea water sports
activities; and
(i) Climate change: The pristine beaches and coastal resorts, that are the main pull
factors for visitors, are subject to the impacts of climate change and need

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 appropriate protection and rehabilitation. It may also lead to overcrowding in
certain areas, creating pressure on local infrastructure and resources.

Financial Services Sector

159. The Mauritius International Financial Centre has positioned itself as a jurisdiction of
substance, offering a stable, competitive, cost effective and mature tax system. However, it has
to adapt to changes in the global financial environment to be competitive, and well regulated.
The main challenges facing the sector are as follows:
(a) Compliance with evolving international standards: Appropriate measures will
have to be taken at an early stage so as to comply with the evolving international
standards under the FATF and OECD, in view of the mutual evaluation exercise
to be carried out by the Eastern Southern African Anti-Money Laundering Group
in 2027;
(b) Competition from other IFCs: Emerging IFCs such as GIFT City (India), Dubai
IFC, and the Rwanda and Nairobi hubs are offering attractive tax regimes and
innovative financial products that represent serious competitors for Mauritius;
(c) Overdependence on traditional products and services: Concentration on
traditional products, lack of awareness and limited promotion are impeding the
development of innovative products such as wealth management, family office,
fintech and green financing instruments; and
(d) Labour shortage: Lack of qualified professionals and brain drain are hindering
the development of the sector and driving cost of doing business higher.

ICT and Digital Services Sector

160. There are new opportunities for development in the ICT sector such as Artificial
Intelligence (AI), Robotics, digital health technologies, Edtech, Cybersecurity and Cloud
computing. However, the sector is constrained by the following challenges impeding its ability
to embrace these new developments:
(a) Shortage of skilled labour: Shortage of key specialised skills such as big data
and analytics, cybersecurity experts, digital marketers, amongst others, and the
most in-demand programming languages like Python, Java, JavaScript, C#, and
PHP have seriously impended on the expansion plans of the existing operators
and entrance of new operators;
(b) Lack of incentives to embrace IT career: Students are increasing enrolling for
management, law, accounting and medical courses instead of ICT and computer
related subjects;
(c) Rising cost of doing business: The increase in salary cost at all levels of
operations, particularly in view of lack of required professionals, is impacting on
some companies’ operations and their international competitiveness;

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 (d) Up-to-date ICT training: ICT courses should be reengineered to keep pace with
new and disruptive technologies, and equip the workforce with multidisciplinary
skills in light of increasing automation; and
(e) Limited access to finance for start-ups: Technology start-ups face challenges
in securing funding for developing their business and commercialising their
products.

Renewable Energy Sector

161. In view of the objectives of Government for a greener Mauritius, the renewable
energy (RE) sector has the potential to develop into a major source of growth in the future.
However, the sector is being constrained by a number of challenges as follows:
(a) Bankability of RE projects: Contracts for solar projects do not have a fair
sharing of the risks, namely country and commercial risks, and are thus not
considered as bankable;
(b) Relatively small market: The small local market for renewable energy
equipment limits the scope for investment in major production projects. New
avenues for exports of such equipment need to be explored; and
(c) Labour shortage: Limited availability of skilled labour is a major concern for
the development of the sector and the transition to clean energy.

Bio Industry
162. The Bio industry has the potential to develop new activities in Mauritius such as
healthcare services (including specialised hospitals, residential care facilities and medical
tourism), life sciences (comprising biopharmaceutical research and clinical trials), and medical
devices and pharmaceuticals manufacturing. In order to ensure the effective development of
the industry, the following challenges will have to be addressed:
(a) Legislative and regulatory framework: There is need for the enactment of
appropriate legislations to regulate freezing/banking of human gametes, embryos,
embryonic tissues and cord blood as well as stem cell and gene therapy treatments
to be provided in Mauritius. Existing legislations such as the Pharmacy Act 1983
and the Clinical Trials Act 2011 will have to be reviewed;
(b) Administrative bottlenecks: Cumbersome and lengthy procedures for
registration of specialist doctors and foreign veterinarians creating a shortage of
professionals and impeding the development of the industry; and
(c) Limited market development: Limited air connectivity with Africa hinders the
development of Mauritius as a medical tourism destination as potential patients
prefer to travel direct to destinations such as India, Dubai and Singapore.

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 Chapter 13
PRESSING SOCIAL ISSUES

163. Government is committed to enhancing the quality of life of the whole population and,
in particular, the elderly, persons with disabilities, poor and vulnerable groups through social
protection and empowerment schemes. In recent years, a number of pressing social issues have
emerged such as the ageing population, an out of tune education system and healthcare
priorities, that need to be addressed urgently. The challenges are detailed out below:

Ageing Population
164. The demographic structure of Mauritius is changing drastically due to a drop in the
number of births and an improvement in life expectancy, leading to an ageing population.
While in 2014, 14.6% of the total population was aged 60 and above, this proportion has now
reached 21%. It is projected to increase further to around 30% in 2042 and 40% in 2062.

165. The ageing population has a number of implications on the economy, public finances
and the society as a whole. As the working-age population declines, this will impact negatively
on economic activities and lead to lower economic growth. In addition, with fewer people
paying taxes and more people claiming pension benefits, there will be an increasing pressure
on public finances.

166. Moreover, as older people have greater health and long-term care needs, more resources
will be required for providing specialised healthcare infrastructure and services. New facilities
such as old age homes, transportation and security services will have to be put in place.

Education
167. The education system, which performed well in the 1980’s and 1990’s, is out of tune
with the extensive socio-economic changes that have taken place locally and internationally.
The system is characterised by a low internal efficiency resulting in a significant number of
dropouts. Only 3 out of 10 students who joined the primary schools pursue their tertiary
education, implying a significant waste of human resource potential. The quality of education
being dispensed needs to be improved to ensure better outcomes. Education and training
programmes being offered do not meet the requirements of industries, generating skills
mismatch in the labour market.

168. School indiscipline is a major concern, as bullying and violence amongst students,
possession of illicit substances and consumption of spirit drinks in school premises have
increased significantly. Teachers need a well-defined continuous professional development
programme, which is essential for them to remain abreast of the latest trends, technologies and
teaching practices. The adoption of digital technologies in teaching and learning, and school
administration has to be accelerated.

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Healthcare
169. The healthcare sector in Mauritius faces a number of challenges, despite the country's
relatively advanced healthcare infrastructure and facilities. With the ageing population, the
demand for chronic disease management (e.g., diabetes, hypertension), long-term care services,
and geriatric healthcare professionals is rising, thus increasing the burden on the healthcare
system. In addition, the rising cost of medicines, medical disposables and consumables
coupled with public demand for additional and improved health services is having a strong
bearing on the financial sustainability of the sector.

170. Moreover, shortage of specialists, nurses, and other allied health staff is leading to
increased workload for existing staff, longer waiting times for patients, inability to offer
specialised services in certain medical fields and a reduction in the quality of care. In addition,
the healthcare system needs to be strengthened and prepared to deal with emerging threats such
as pandemics, infectious diseases, respiratory problems due to air pollution, and heat-related
illnesses.

171. There are also notable inefficiencies in the healthcare system such as inadequacies in
medical supplies management leading to expiries and wastages, poor healthcare staff
management resulting in high overtime costs, and poor management of hospital infrastructure,
especially high-tech medical equipment which leads to long waiting lists for important medical
care.

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 Chapter 14
CONCLUSION

172. The above analysis shows that the state of the economy and public finances is a matter
of serious concern. Mismanagement of the economic affairs of the country and policy
inconsistencies have led to low GDP growth, worsening trade, current account and balance of
payments deficits, high inflation, unsustainably high level of budget deficit, surging public
sector debt, and persistent structural constraints.

173. It is clear that the situation calls for urgent and effective policies to reverse the
deteriorating trends in the macroeconomic fundamentals, redynamise sectoral growth, rebuild
the credibility and effectiveness of our institutions, and regain the high values that we have
inherited from our forefathers.

174. We must forge ahead in our task of rescuing the economy and turning it around with
well thought-out corrective policies and measures, and in a responsible manner.

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