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© 2005 International Monetary Fund

August 2005

IMF Country Report No. 05/281

Mauritius: 2004 Article IV Consultation—Staff Report; Staff Statement; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Mauritius

Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2004 Article IV consultation with Mauritius, the following documents have been released and are included in this package:

  • the staff report for the 2004 Article IV consultation, prepared by a staff team of the IMF, following discussions that ended on April 1, 2004, with the officials of Mauritius on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on June 18, 2004. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.

  • a staff statement of July 21, 2004 updating information on recent developments.

  • a Public Information Notice (PIN) summarizing the views of the Executive Board as expressed during its July 21, 2004 discussion of the staff report that concluded the Article IV consultation.

  • a statement by the Executive Director for Mauritius.

The document listed below has been or will be separately released.

Selected Issues Paper and Statistical Appendix

The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.

To assist the IMF in evaluating the publication policy, reader comments are invited and may be sent by e-mail to

Copies of this report are available to the public from

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Staff Report for the 2004 Article IV Consultation

Prepared by the Staff Representatives for the 2004 Consultation with Mauritius

Approved by Juan Carlos Di Tata and Martin Fetherston

June 18, 2004

  • The 2004 Article IV consultation discussions were held in Port Louis during March 19-April 1, 2004. The mission met with the Deputy Prime Minister and Minister of Finance, The Honorable Mr. Pravind Jugnauth; the Governor of the Bank of Mauritius, Mr. Rameswurlall Basant Roi; the Financial Secretary, Mr. Krishnanand Guptar; other senior government officials, and representatives of the private sector and trade unions.

  • The staff team comprised Mr. McDonald (head), Mr. Yao, Ms. Kim, Mr. Mikhael, (all AFR) and Mr. Porter (FIN). Mr. Ismael (Advisor, Executive Director for Mauritius) also participated in the discussions.

  • Mauritius is on the standard 12-month consultation cycle. At the conclusion of the 2003 Article IV consultation on June 30, 2003, Executive Directors noted that sound macroeconomic policies have established the conditions for investment and growth and the strong performance of the economy over the last two decades. Directors observed that the key challenges in the medium term will be to: (1) explore the scope for further economic diversification; (2) address the problem of persistent unemployment; and (3) contain the budget deficit and overall public debt in order to minimize the risks to medium-term macroeconomic stability.

  • Mauritius accepted the obligations of Article VIII, Sections 2 (a), 3, and 4 on September 29, 1993, and its exchange system is free of restrictions on the making of payments and transfers for current international transactions. Mauritius also maintains a liberal capital account. It last availed itself of Fund resources in July 1986 and settled all repurchase obligations in May 1991. Since June 2002, Mauritius has been included as a creditor in the Fund’s financial transaction plan.

  • Appendix I presents an assessment of public and external debt sustainability. Mauritius’s relations with the Fund, including technical assistance, are summarized in Appendix II, and its relations with the World Bank Group in Appendix III. The quality and timeliness of Mauritius’s reporting of core data and other economic and financial statistics are, in general, satisfactory for conducting surveillance. Statistical issues are discussed in Appendix IV, progress toward the Millennium Development Goals in Appendix V, and a draft PIN is included in Appendix VI.


  • Executive Summary

  • I. Introduction and Medium-Term Challenges

  • II. Recent Economic Developments

  • III. Report on Policy Discussions

    • A. Medium-Term Growth Sources and Prospects

    • B. Structural Reforms

    • C. Fiscal Policy

    • D. Monetary and Financial Sector Policies

    • E. Exchange Rate and External Sector Policies

  • IV. Staff Appraisal

  • Boxes

  • 1. Political Developments

  • 2. Growth Impact of the Elimination of Trade Preferences

  • 3. The Mauritius Labor Market

  • 4. Domestic Public Debt in Mauritius

  • Figures

  • 1. Domestic Saving, Domestic Investment, Foreign Direct Investment, and Public Capital Expenditure, 1980-2001

  • 2. Real Sector Developments

  • 3. Fiscal Developments

  • 4. Monetary Developments

  • 5. External Developments

  • 6. Medium-Term Fiscal Projections, 2001/02-2007/08

  • 7. Public Sector Debt Sustainability, 2003/04-2007/08

  • 8. External Debt Ratio and Gross External Financing Need, 2002-08

  • Tables

  • 1. Selected Economic and Financial Indicators, 1999/00-2003/04

  • 2. Balance of Payments, 1999/00-2007/08

  • 3. Summary of Government Finances, 1999/00-2004/05

  • 4. Monetary Survey, 2000-2004

  • 5. Indicators of External Vulnerability, 1999/00-2003/04

  • 6. Financial Soundness Indicators for the Banking Sector, 1998-2003

  • 7. Medium-Term Projections, 2002/03-2007/08

  • 8a. Public Sector Debt Sustainability Framework, 1999/00-2007/08

  • 8b. Public Sector Debt Sustainability Framework, 1999/00-2007/08

  • 9. Impact of Revenue and Expenditure Policy Recommendations for 2004/05

  • 10. External Debt Sustainability Framework, 1999/00-2007/08

  • Appendices

  • I. Public and External Debt Sustainability

  • II. Relations with the Fund

  • III. Relations with the World Bank Group

  • IV. Statistical Issues

  • V. Millennium Development Goals

Executive Summary

Following a weak growth performance in 2002/03 (July-June), real GDP is expected to have increased by around 4½ percent in 2003/04, largely reflecting the recovery of sugar production and strong construction activity. The overall fiscal deficit is estimated to have declined slightly to 5½ percent of GDP in 2003/04, and the external current account surplus to have remained unchanged at about 2½ percent of GDP. Inflation is expected to decline to around 4 percent by the end of the fiscal year.

Real GDP growth is projected to remain under 5 percent in 2004/05, and medium-term growth is likely to slow to around 4 percent per annum. While moderate growth is expected in the tourism, information and communications technology (ICT), and sugar sectors, the textile sector is expected to decline further.

Mauritius’s immediate and medium-term challenges are threefold. First, there is a need to diversify and transform the economy, especially in light of the expected loss of trade preferences in the sugar and textile sectors. Second, the authorities must undertake structural reforms to lessen labor market rigidities. Third, persistent budget deficits need to be reduced if medium-term fiscal sustainability and macroeconomic stability are to be preserved.

Medium-term fiscal consolidation is essential to avert unsustainable debt dynamics that could jeopardize the economy’s growth prospects and macroeconomic stability. The government should aim to stabilize the public debt/GDP ratio in 2004/05 by reducing the deficit to around 4¾ percent of GDP. Reductions in the fiscal deficit of around 1 percent of GDP annually in subsequent years would reduce the public debt/GDP ratio to around 66 percent by 2007/08, from above 70 percent in 2003/04. Sustainable fiscal policy would need to be accompanied by prudent monetary and exchange rate policies to protect the economy from downside risks.

In line with the FSAP recommendations, the authorities have taken steps to strengthen the financial system. The government is expected to pass draft laws to revise the Bank of Mauritius Act and the Banking Act at around the time of the announcement of the 2004/05 budget. The authorities have also taken a number of actions to strengthen the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) framework.

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July 21, 2004

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Public Information Notice (PIN) No. 04/98


August 25, 2004

International Monetary Fund

700 19th Street, NW

Washington, D. C. 20431 USA

On July 21, 2004, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Mauritius.1

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July 21, 2004