IMF staff complete Article IV mission to Mauritius in 2021

May 7, 2021

End-of-mission press releases include statements from IMF teams that communicate preliminary findings after a country visit. The views expressed in this statement are those of the staff of the IMF and do not necessarily represent the views of the Executive Board of the IMF. Based on the preliminary findings of this mission, staff will prepare a report which, subject to management approval, will be presented to the IMF Executive Board for discussion and decision.

• Mauritius has managed to contain the Covid-19 virus thanks to strict health measures.
• In the short term, accommodating fiscal and monetary stances are appropriate. As the country emerges from the pandemic, fiscal consolidation will be needed to stabilize public debt and monetary policy measures will need to be strengthened.
• During the recovery phase, Mauritius should prioritize support measures to improve the resilience and competitiveness of the economy and accelerate its long-term structural transformation.

Washington DC:
An International Monetary Fund (IMF) mission led by Cemile Sancak made a virtual visit to Mauritius from April 19 to May 7, 2021 to lead discussions for the 2021 Article IV consultations.

At the end of the virtual tour, Ms. Sancak made the following statement in Washington:

“Mauritius has so far succeeded in containing the Covid-19 pandemic thanks to strict health measures. Mauritius has recorded very few cases of domestic transmission of Covid-19 following a strict nationwide lockdown in March-May 2020 and the border being closed until early. October. Building on the country’s strong public health system, authorities were able to quickly contain the outbreaks by implementing extensive testing, robust contact tracing and strict isolation of all suspected and confirmed cases, and maintaining mask requirements in all public places. were facilitated, comprehensive arrival testing and strict quarantine requirements were put in place. An outbreak of domestic transmission led to a second lockdown in March 2021, although it was shorter and more flexible than the previous year. Vaccinations began in February, and authorities aim to vaccinate 60% of the population by July 2021.

“Despite the country’s success in containing the pandemic so far, the pandemic has severely affected the economy due to the sharp decline in tourism and contributed to a real GDP contraction of nearly 15% in 2020. The authorities have successfully implemented a broad and comprehensive stimulus package to mitigate the impact of the pandemic on the economy, including a wage subsidy and income support for the self-employed, to support businesses and households while preserving financial stability.

“The main macroeconomic challenge for Mauritius is to restore jobs and growth as the tourism sector remains subdued until at least 2022. IMF staff forecast growth of around 5% in 2021, assuming some resumption of tourism. As the country emerges from the pandemic, however, there is uncertainty over tourist flows, which depend on the propensity to travel as the pandemic recedes, as well as conditions in other countries.

“The mission supported the authorities’ overall fiscal policy response and advised them to maintain the accommodative fiscal stance during the reopening phase with priority and targeted spending to pave the way for resilient growth. The mission recommended prioritizing programs that match medium-term development needs and broader social and environmental goals, such as digitization, inclusion and climate change mitigation during the recovery phase.

“The government should prepare fiscal consolidation plans to stabilize debt over the medium term once Mauritius has firmly emerged from the pandemic to preserve fiscal sustainability and create buffers given the substantial increase in the level of public debt , which will likely exceed 90% of GDP in the wake of the crisis.

“The mission supported the monetary policy response to the crisis and advised the central bank to maintain an accommodative monetary policy in the short term. He recommended strengthening the leverage of monetary policy in anticipation of the end of the crisis. Mechanisms should be gradually put in place to further support the credibility of the central bank and consolidate an effective monetary policy as the economy returns to a normal level of capacity utilization and the need for monetary policy normalization. becomes obvious. The law on the central bank is being reformed, in particular to prevent new one-off transfers to the government, in line with international best practices. In addition, the mission recommended that the central bank relinquish ownership of the Mauritius Investment Corporation (MIC) and that funding for the MIC be secured through the budget process.

“During the recovery phase, the authorities should prioritize support measures to further improve competitiveness, enhance diversification and accelerate long-term structural transformation to make Mauritius a sustainable and resilient economy based on education and technology.

“The mission welcomed the concerted efforts of the authorities to withdraw from the Financial Action Task Force (FATF) and European Union against Money Laundering / Countering the Financing of Terrorism (AML / CFT) lists and encouraged to continue these efforts.

“The mission met Prime Minister Pravind Jugnauth, Minister of Finance, Economic Planning and Development, Mr. Renganaden Padayachy, Governor of the Bank of Maurice Harvesh Seegolam, and other senior government and Bank of Mauritius, as well as the opposition. leader, representatives of the private sector, civil society and the diplomatic community.

“The mission team expresses its gratitude to the authorities for the productive discussions and the excellent cooperation. The IMF stands ready to assist the authorities in implementing their economic program, including capacity building, and looks forward to continuing a fruitful political dialogue. ”