1. IMF says that the economy will grow by only 5% in 2021, and modestly by around 3 to 31/2 percent in the medium term, mainly because the tourism outlook is uncertain. Govt is instead banking on much higher growth rates of 9% followed by 6% in following years. Govt is being overoptimistic.
2. IMF says Mauritius should address sustainability concerns about its public debt. The PM and the Minister of Finance, on the other hand, are denying the existence of sustainability issues about public debt, saying that our public debt ratio is far less than in Singapore and Japan. The IMF view is in contradiction with Govt’s position on the rising level of our public debt.
3. IMF recommends that Govt should prepare to reduce public debt by adjusting Govt revenues and expenditures after the covid crisis, including adjusting the deficit on pensions. However, Govt has shown no inclination so far to prepare a credible plan to adjust the post-Covid budget or pensions deficit.
4.IMF also recommends the application of a fiscal rule that would statutorily enforce measures towards a reduction in public debt. Govt had suspended the provisions of the Public Debt Management Act applying to the observance of a ceiling on the level of public debt in relation to GDP, and has not indicated any change to reinstate its application.
5. IMF considers that the fiscal deficit should be a consolidated deficit of both the budget and special funds, and further considers that transfers of Rs60 bn from the central bank should not be treated as Govt revenue. IMF thus estimates the consolidated budget deficit at 16% of GDP in 2020/21. Instead, Govt states a much lower official budget deficit figure of 5.6% of GDP, by insisting on including BOM transfers in revenue. IMF estimates a consolidated budget deficit of 8% of GDP in 2021/22, whereas Govt’s official deficit figure is 5% of GDP.
6. IMF emphasizes that BOM should refrain from financing Govt directly, and that BOM legislation should be amended to prevent any exceptional transfers to Govt. Govt has not ruled out the possibility of more exceptional grants from BoM.
7. IMF recommends that BOM disengage from MIC, and that MIC be funded through the budget. Govt continues to adhere to a process of MIC financing by BoM which is not transparent and not accountable to the public.
8. IMF noted that the external position of Mauritius at end 2020 was fundamentally weak, with a current balance deficit estimated at over 12% of GDP in 2020 and over 15% of GDP in 2021. Govt asserts that our external reserves position is adequate, without any reference to our widening current account and balance of payments deficits.
9. This government is only interested in some minor reforms -some improvements to the Doing Business indicators to boost FDI- while the IMF is pressing for more broad-based reforms -enhancing diversification, strengthening competitiveness, improving public sector procurement practices, and mitigating vulnerabilities to climate change.
