The World Bank has published a report on Mauritius entitled “Mauritius – Systematic Country Diagnostic (SCD) Update”, dated January 2022, which identifies the new 7 top priorities for the World Bank in Mauritius in the light of recent and new developments. In view of the deteriorating fiscal situation, bringing debt levels to over 100% of GDP, the World Bank has introduced a new criterion which emphasizes the importance of fiscal reforms and consolidation in the medium term.
Public Debt
In the World Bank’s debt analysis, public debt was on the rise prior to Covid, increasing further following Covid related fiscal expenditures “from 65 percent of GDP in June 2019 to 101 percent in June 2021 and will likely remain elevated in the medium term.” The World Bank has developed two debt scenarios –
1. Scenario One with revenues and expenditures in line with pre Covid trends, without any fiscal correction measures
2. Scenario Two with tax revenue measures, and cuts in public spending, including a capping of Basic Retirement (old age) pensions at current levels.
GDP growth is assumed to average about 3% annually and inflation around 2% yearly. Under Scenario I, on a no policy change basis, the debt to GDP ratio would rise continuously after 23/24 to reach over 120% of GDP by 2035. Under Scenario 2, with fiscal consolidation, the debt ratio would be reduced to 90% of GDP in 2035.
The World Bank concludes that “in the absence of significant adjustments to the fiscal trajectory, the debt level would rise to unsustainable levels in the medium term.”
BRP
The World Bank notes that the BRP is not targeted to the poor and has regressive effects, contrary to the Social Aid Program and the Marshall Plan Social Contract, which are more effective in tackling poverty and inequality.
The World Bank also notes that the dismantling of the NPF contributory pension system for private sector workers “could put further pressure on future increases in the Consolidation Sociale Generalisee as the population ages”.
Governance
The World Bank also highlights the lack of fiscal transparency and the deterioration of perceptions of public institutions. Since 2015, previous progress made with Program Based Budgeting has been reversed, and fiscal management has deteriorated due to the increasing use of off-budget special purpose vehicles and extra budgetary funds for public investment. The World Bank notes that “Trust in public institutions and democracy is decreasing”. and that “Mauritius has dropped its ranking on the Corruption Perceptions Index since 2012”.
Climate Change
The World Bank draws attention to the high vulnerability of the infrastructure sector to climate change, particularly the ICT, energy, water and transport sectors. Climate risks arise from sea severe coastal erosion and sea level rise, and flooding and storm surges.
“Climate change is already affecting physical water availability. CWA produces about 46 percent of treated water from surface water resources and about 54 percent of the treated water from boreholes. Mauritius has reached the limit of sustainable exploitation of its aquifers and the availability of water resources is heavily dependent on rainfall which is affected by climate change.
It is projected that Mauritius would move from being a water-stressed country to become a water scarce country when it reaches a population of 1.34 million (as of 2020, the population was 1.26 million), with a projected per capita water availability of 974 cubic meters (World Bank, 2017). Improving water security is critical to securing the continuity and good quality of a potable water supply for the island’s population and to sustain its economic development.”
In addition, poor progress in waste water management implies greater risks of pollution of underground water.
