IMF Endorses Mauritius's Fiscal Policy

by Ulrika Lomas, Tax-News.com, Brussels

04 February 2011

The International Monetary Fund (IMF) has published the details of its Article IV consultation with Mauritius.

The assessment is based on the findings of an IMF mission led by Martin Petri during meetings with the government, and the private sector, on January 19 to February 2, 2011. Upon the conclusion of the visit, Petri relayed the following:

“The Mauritian economy has performed better than expected with real growth at market prices increasing to 4% in 2010. This was not least due to the authorities’ prompt and comprehensive policy response to the global crisis over 2008–10.”

“The challenge going forward will be to accelerate growth through increased public and private investment and productivity advances while continuing medium-term fiscal consolidation to reduce economic vulnerabilities."

Petri said the 2011 budget places Mauritius "on a strong growth trajectory.” Presenting recommendations on fiscal policy going forward, Petri said:

“With a small output gap estimated for Mauritius in 2011, the mission recommends careful execution of capital spending, tight financial controls on public enterprise loans, and saving unexpected revenues to limit the increase in the fiscal deficit. A well designed and predictable tax policy should support the government’s medium-term fiscal consolidation and growth agenda.”

“Mauritius is a pioneer in the development of green taxes, but more can be done, not least regarding the increasing road congestion. Here, tax policy has a critical role to play, including the fine-tuning of vehicle taxation to increase incentives to reduce emissions and congestion. An explicit carbon tax could replace a similarly structured tax to improve climate policy,” Petri advocated.

Concluding, Petri said: “The mission welcomes the structural reforms in recent years, which have contributed to raising Mauritius’s competitiveness. Maintaining reform momentum to reduce critical structural bottlenecks in infrastructure and the parastatal sector, as well as supporting export-oriented SMEs launching new products and services, will further strengthen Mauritius’ ability to compete in the world economy, including as an international financial center.”

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