Debate Over 5 Key IMF Recommendations Integrated into Budget

The Mauritian government has incorporated five key recommendations from the International Monetary Fund (IMF) into the 2025/26 Budget. These measures have sparked public debate, especially the proposed increase of the retirement age from 60 to 65. Experts, including actuaries, say reforming the pension system is long overdue.

Raising the Retirement Age from 60 to 65
The IMF suggests increasing the retirement age due to rising pension costs, which now account for about 7.5% of GDP.

The measure aims to save up to 1.7% of GDP over time. The government has adopted this recommendation fully, but faced with unpopularity, it has set up two committees to explore targeted financial support for affected groups.

Ending Home Ownership and Home Loan Payment Schemes
The government plans to end the Home Ownership Scheme (which refunds 5% on property purchases) and the Home Loan Payment Scheme (which refunds 5% on mortgage payments) by June 30, 2025.

The IMF estimates that abolishing these programs could cut public spending by 0.7% of GDP and improve financial stability.

Abolishing the Independence Scheme
The IMF also recommends ending the Independence Scheme, representing 0.06% of GDP.

The government announced in the Budget that this aid will be discontinued from July 1, 2025, except for 18-year-olds from social welfare households.

Lowering the VAT Registration Threshold to Rs 3 million
Starting October 1, 2025, companies with an annual turnover above Rs 3 million will be required to register for VAT, down from Rs 6 million.

The IMF estimates this change will bring in about Rs 4 billion (roughly 0.6% of GDP) in extra revenue and will include an additional 10% of businesses in the VAT system.

While helpful for revenue, small businesses worry about increased administrative costs.

Reintroducing Excise Tax on Electric Vehicles
Due to concerns over rising car imports and traffic congestion, the government will reintroduce excise tax on hybrid and electric vehicles, effective June 6, 2025.

This measure aims to reduce the number of new car imports, which could cost the country over Rs 20 billion in foreign reserves this year.

Expert Opinion: A Balanced Approach
Many see the IMF as often pushing austerity measures, but this time, the recommendations are tailored to Mauritius’s realities, without financial or sovereignty constraints.

A political analyst compares this approach to the 1980s, when the government worked with the IMF to stabilize the economy and achieve growth.

Today’s strategy combines technical advice with political independence, allowing the government to choose reforms that align with national priorities.

The goal is to ensure dignity for current retirees while creating a fairer, sustainable future. No reform is mandatory; the key is making the right choices to balance social needs and economic stability.

Public Opposition: Protests Against the IMF
On June 21, residents of Rose-Hill and Port-Louis protested against the pension reforms, holding banners saying “Workers are not pawns for IMF and Moody’s” and “IMF go home.”

Demonstrators oppose the pension age increase, viewing it as unfair. Unions also criticized the government for following IMF advice, reminding that the government was elected by the people, not the IMF.

Source: Defi Media