Economy Experts: “New Government Priorities are the Rupee, Debt, & Unemployment”

The newly elected government of Mauritius, led by Navin Ramgoolam, faces significant economic challenges ahead. As they prepare to take office, two economists offer their insights and outline the most pressing issues that require immediate attention.

Former Finance Minister Renganaden Padayachy recently claimed that Mauritius is experiencing an economic boom, projecting a 6.5% growth rate for this year and expecting economic progress of 7% by 2025.

However, not all experts share this optimistic view.

Sanjay Matadeen, an economist and lecturer at Middlesex University Mauritius, argued that many economists would dispute Padayachy’s analysis, asserting that the country is merely recovering from a recession and is stagnating in existing sectors.

“This year, tourist arrivals might only reach pre-2019 levels,” Matadeen noted, questioning the lack of new drivers for an economic boom.

He highlighted that Mauritius is heavily reliant on imported goods and cannot depend solely on domestic consumption.

“What external factors contribute to a boom in the Mauritian economy? There are none at the moment,” he stated.

The new administration must scrutinize the economic data and evaluate the costs of proposed measures.

Matadeen emphasized the need for investment to rejuvenate the economy. He outlined several key economic priorities for the government:

1. Inflation Control: Stabilizing prices is critical and should be a government priority.
2. Strengthening the Rupee: Efforts must be directed at halting the depreciation of the Mauritian rupee to strengthen the local currency.
3. Independence of the Bank of Mauritius: The central bank must operate independently, focusing on reducing inflation.
4. Promoting Economic Growth and Managing Public Debt: A target growth rate above 5% is essential, not only to finance electoral promises but also to expand the national economic “pie”. This will involve reevaluating public expenditures and reducing debt as a percentage of Gross Domestic Product (GDP).
5. Developing New Sectors: Establishing frameworks for the growth of new economic sectors is vital.
6. Enhancing Production and Competitiveness: Increasing local production will reduce reliance on imports and improve export levels, thereby addressing the balance of payments deficit through higher foreign currency inflows.
7. Job Creation: Mauritius faces a labor shortage. It is crucial to invest in training and reskilling programs, as many individuals are underemployed. The government must create favorable conditions to retain young talent amid an aging population and youth migration.
8. Wealth and Income Distribution: Addressing the wealth gap and ensuring equitable distribution of resources is imperative.

Manisha Dookhony, another economist, emphasized the need to defend the rupee, an essential step to control prices and curb inflation.

She noted a significant currency crisis, where external factors, such as the strengthening dollar, exacerbate the situation and drive prices up.

In terms of revenue, Dookhony underscored the importance of consolidating income measures and addressed concerns regarding the accounting of GDP and non-revenue aspects of investment transactions.

Furthermore, she highlighted the urgency of developing new sectors aimed at boosting exports, especially given Mauritius’s unfavorable balance of payments.

Finally, regarding public debt, Dookhony pointed out that Mauritius’s debt is primarily domestic.

The downward trend in interest rates has aided debt repayment, and the current debt-to-GDP ratio appears to be declining.

Source: Defi Media