Mauritius’s Rs55 Billion Pension Crisis: Reform Is Imperative, Says Ramgoolam

Prime Minister Navin Ramgoolam has defended a necessary pension reform aimed at ensuring the long-term financial stability of the country’s retirement system. Speaking to Parliament on June 17, he warned that current pension expenses are becoming unsustainable due to demographic changes.

The reform focuses on the Basic Retirement Pension (BRP), which currently pays out from age 60 to anyone meeting residence and age criteria, without requiring contributions or income tests.

Ramgoolam explained that this system is heavily straining government finances amid a rapidly aging population and declining birth rates.

Growing Pension Costs and Demographic Challenges

Since 2010, pension spending has increased significantly, rising from 1.9% of GDP to 7.8%. In monetary terms, the amount spent on the BRP has more than doubled, reaching Rs 55.4 billion in 2024-2025.

If no action is taken, projections estimate that costs could exceed Rs 100 billion by 2035.

The number of active workers relative to retirees has also declined, with the ratio dropping from 3.9 in 2015 to 2.7 today and expected to fall to 2 by 2035.

This, combined with low birth rates—1.34 children per woman in 2024—and increasing life expectancy, puts further pressure on public finances.

PM Ramgoolam noted that pension expenses now surpass combined budgets for education, health, and housing. Public debt is projected to reach Rs 642 billion by June 2025, equal to about 90% of GDP.

Aligning Retirement Age and Support Measures

The proposed reform will align the pension eligibility age with the official retirement age of 65. Importantly, the legal retirement age remains unchanged; only the conditions for accessing the pension will be harmonized.

To assist those affected by the transition, two interministerial committees will be formed.

The first, led by the Prime Minister, will explore support measures for individuals aged 60 to 65 whose income depends heavily on the BRP—such as homemakers or retirees with small pensions.

The second, led by the Minister of Social Security, will examine aid for those unable to work due to health issues.

Preventing a Crisis Like Greece

Ramgoolam warned that failure to reform could threaten Mauritius’s credit rating, potentially leading to a “junk status,” which would increase borrowing costs, destabilize the financial sector, weaken the currency, and harm the economy.

He emphasized that many developed countries have already adopted combined approaches—raising retirement age, introducing mandatory contributions, and applying income-based criteria—to balance their pension systems.

A Necessary but Unpopular Step

The Prime Minister acknowledged that the reform will be unpopular but stressed it is essential.

“We have a responsibility to secure the future for our children and grandchildren,” he said.

“This reform is vital to maintain the stability and sustainability of our pension system.”

Source: l’Express