Budget 2024-25: IMF Sounds Alarm, Mauritius’ Economy at Fiscal Risk

As the Minister of Finance, Renganaden Padayachy, is preparing to confirm the official date for the presentation of the 2024-25 budget, the summary of the International Monetary Fund’s (IMF) Article IV Consultations has given a glimpse into the economic and budgetary challenges that Mauritius is facing.

Simultaneously, civil servants have been voicing their impatience over the lack of decision on the reinstatement of salary relativities with the introduction of the Minimum Monthly Salary since the start of this year.

The IMF’s report highlights that the economy has rebounded strongly from the pandemic, driven by buoyant tourism, social housing construction, and financial services.

Supportive policies, including fiscal measures, have facilitated this strong recovery. Tourism has been the driving force behind this recovery, benefiting from contributions from the financial services sector and construction, with a growth rate of 8.9% in 2022, 7% in 2023, 4.9% in 2024, and 3.5% in the medium term.

However, the IMF mission, which visited Mauritius in January, has warned that securing a sustainable and resilient economy presents challenges.

Fiscal and external buffers were eroded during the pandemic, and vulnerabilities to climate change and an ageing population loom over longer-term economic prospects.

The IMF’s board recommends that a gradual and growth-friendly fiscal consolidation over the medium term is needed to rebuild fiscal buffers and further reduce public debt.

This package includes the need to mobilize fiscal revenues, contain public expenditures, while preserving the gains of the State-Providence.

However, just a few paragraphs later, the IMF’s report notes that directors called for reforming the pension system and strengthening public financial management, including by streamlining extra-budgetary special funds.

The independence of the Bank of Mauritius is also a concern for the IMF in this context. The establishment of the Mauritius Investment Corporation, with a capital of Rs 82 billion, in foreign currencies, sourced from the central bank’s reserves, remains a concern.

Unlike previous editions of the Article IV Consultations, the board of directors seems to have poured cold water on exploring options to gradually phase out the central bank’s ownership of the Mauritius Investment Corporation.

In contrast, in 2022, the IMF had been considering imposing the Development Bank for the purchase of MIC from the Bank of Mauritius.

Meanwhile, as budget season approaches, the most delicate signal sent to Government House comes from leaders of the Federation of Civil Service Unions (FSSC), who have held a press conference to express their impatience regarding salary relativities with the Minimum Monthly Wage principle.

“Since March, this adjustment to salaries should have been made public, while since January, there is a new minimum wage rate in effect,” declared Vinesh Sewsurn, president of FSSC.

This comment is loaded with significance and raises questions among those at Lakwizinn du Prime Minister’s Office, particularly following a position taken by syndicalist Reeaz Chuttoo, president of the Confederation of Unions for Private and Public Sectors on this same chapter of salaries.

However, Minister Soodesh Callichurn’s silence on this issue remained open to interpretation…

Source: Defi Media