IMF Praises Mauritius For 'Remedial Fiscal Actions'

by Amanda Banks, Tax-news.com, London

24 May 2001

The International Monetary Fund Released details of its Article IV Consultation with Mauritius this week, praising the country's strong economic recovery. With real GDP growth expected to grow at 7.8 per cent over the following year (up from 3.6 per cent last year), the depreciation of the Mauritian rupee, a successful privatisation programme and several 'remedial fiscal actions' put into place over recent months, the IMF reported that it has granted Mauritius' request for technical assistance to 'improve the quality and coverage of the overall public accounts ... [and] ... to strengthen and modernize Mauritius's financial sector.'

Such 'remedial fiscal actions' referred to by the IMF include cleaning up the government's monetary policies under revisions made to the Bank of Mauritius Act which clarified and strengthened the Central Bank's authority giving it more independence, transparencey and accountability, and the power to improve regulating price stability.

The IMF noted that in July 2000, 'significant reductions' were realised in external tariffs, income taxes and indirect taxes. As a result stated the IMF: '...and notwithstanding the increases in domestic prices of petroleum products and electricity implemented by the new government in September 2000, the overall fiscal deficit in 2000/01 is likely to further widen to 7.6 per cent of GDP.'

But the IMF expects that the public sector's net borrowing requirement in 2000/1 will be significantly reduced due to the proceeds from privatisation. In November last year the government sold 40 per cent of its shares in Mauritius Telecom for US$261 million to France Telecom.

The report's comments also welcomed recent measures introduced by the government such as the much-needed adjustments of petroleum and electricity prices, but stressed that much more needed to be done. It concluded: 'The new spending initiatives, while contributing to higher productivity growth in the future, were likely to add to the immediate fiscal pressures and give rise to an unsustainable debt burden that could further jeopardize growth prospects in the medium term. Nevertheless, Directors considered that Mauritius is well placed to face its challenges in the period ahead.'

The full text of the IMF's 'Article IV Consultation with Mauritius' can be found at: http://www.imf.org/external/np/sec/pn/2001/PN0152.HTM

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