This review of Mauritius was kindly provided by AXYS Financial Services Group who recently became a member of the Association. We are grateful for their contribution. This is a commentary, and comments are welcome by email to: info@eaa.co.ke
A REVIEW OF MAURITIUS
This review of Mauritius was kindly provided by AXYS Financial Services Group who recently became a member of the Association. We are grateful for their contribution.
Economy review
Political Developments
In November 2024, Mauritius held its highly anticipated General Election, culminating in a decisive victory for the “Alliance du Changement”, a coalition of four parties. This alliance brought together two major political forces: the “Parti Travailliste Mauricien” and the “Mouvement Militant Mauricien”, alongside two smaller parties, “Nouveaux Democrats” and “Rezistans ek Alternativ”. Notably, the inclusion of Rezistans ek Alternativ marks a historic milestone for Mauritius, as it is the first time a left-wing party has been elected to the Government. The landslide victory reflects a strong mandate from voters, signalling broad support for the party’s proposed reforms and governance plans. The triumph grants the Alliance du Changement a five-year term to execute their ambitious agenda, focusing on economic reform, social development, and improved governance. With public trust firmly secured, the party is positioned to lead a transformative era, striving to revitalize the nation’s economy and lay the groundwork for sustainable prosperity.
Gross Domestic Product
The Mauritian economy remains predominantly service-driven, with the tertiary sector accounting for more than two-thirds of the total Gross Value Added (GVA). Estimates indicate that, in 2024, the Nominal GDP reached MUR 698.5 billion (USD 15.1 billion), representing a year-on-year growth of 8.9%. In real terms, GDP growth in 2024 stood at 5.1%. The main contributors to the growth in GVA would be construction and sectors like accommodation, financial services, manufacturing, and wholesale & retail adding smaller shares. The IMF expects the Real GDP to grow by 3.5% in the medium term.
Gross Public Debt
As of June 2024, Mauritius’ Gross Public Sector Debt reached 83.4% of GDP, exceeding pre-COVID levels. For the next financial year, a modest increase is projected, with the figure rising to 84.5%. However, a silver lining to the high public debt is that the majority of it is denominated in Mauritian Rupees, reducing exposure to foreign exchange risks.
Government revenue and expenditure
In the Financial year 2024, Government revenue and expenditure are estimated to stand at MUR 174.8 billion (USD 3.8 billion) and MUR 202.1 billion (USD 4.4 billion). This corelates to a year-on-year growth of 13.9% for expenditure and a 18.4% for revenue. For the Financial Year 2025, expenditure is expected to grow by 17.4% to MUR 237 billion (USD 5.1 billion) and revenue by 19.3% to MUR 207 billion (USD 4.5 billion).
Value Added Tax (VAT) remains the largest contributor to Government revenue, consistently accounting for around 34% of total revenue since the financial year 2016. VAT was estimated to grow by 17.5% to MUR 56 billion (USD 1.2 billion) in the Financial Year 2024 and it is expected to grow further by 16.9% to MUR 65 billion (USD 1.4 billion).
Key rate and currency depreciation
On 20th September 2024, the Monetary Policy Committee unanimously approved a reduction in the Key Rate from 4.5% to 4.0%, where it has remained unchanged since. Over the past year, the Mauritian Rupee continued its depreciating trend, weakening by 4.6% against the USD – a pattern observed since 2014.
However, on 4th February 2025, during the first MPC meeting under the new BoM Governor, the Key Rate was increased by 50bps to 4.5% to mitigate the exchange rate pressures and address the negative interest rate differential compared to the US.
Inflation
The headline inflation rate dropped significantly to 3.6% in 2024, down from 7.0% in 2023. Inflation in Mauritius is primarily driven by the country’s import-dependent economy and the depreciation of the Mauritian Rupee against the USD, which increases the cost of imported goods; price hikes that are ultimately passed on to consumers.
Recent Developments
Chagos Sovereignty conundrum
On the international front, the UK has postponed finalising the transfer of sovereignty over the disputed Chagos Islands to Mauritius pending consultation with U.S. President-elect Donald Trump’s administration. In October 2024, the UK announced plans to cede sovereignty while maintaining control of the Diego Garcia military base under a 99-year lease. However, concerns were raised by President Trump’s allies, highlighting potential national security risks due to Mauritius’s trade ties with China.
UK Prime Minister Keir Starmer’s office stressed the need to engage with the incoming U.S. administration, underscoring that any agreement must align with the UK’s interests and security priorities. Although negotiations were initially fast-tracked to conclude before President Trump’s inauguration, reports suggest a sudden shift in the UK’s position, leaving Mauritian officials in uncertainty.
New government policy changes
Employers are legally required to provide employees with a 13th month bonus at the end of each year. In line with one of its key proposals, the newly elected Government introduced an exceptional 14th month bonus for 2024. In December, authorities implemented a scheme mandating employers to pay this additional bonus, capped for employees earning up to MUR 50,000 (USD 1,080). To support businesses facing challenges in meeting this obligation, the Government offered assistance, provided companies submit the necessary documentation to justify their difficulties. While the capped measure was welcomed by some, it left others feeling dissatisfied.
In December 2024, the new Government reduced the retail price of Mogas and Gas Oil to MUR 61.20/litre (USD 1.32) and MUR 58.95/litre (USD 1.49) respectively. While this measure will undoubtedly reduce the Government revenue, the policy could positively impact the economy as lower fuel prices would entail a reduced cost on goods and services dependent on transportation. As such, this will exert a deflationary effect on the overall price level of these goods and services, boosting affordability and economic growth.
OUTLOOK
On 30th January 2025, Moody’s changed the outlook of Mauritius’ rating to negative from stable but reaffirmed its Investment Grade rating of Baa3. The outlook change was mainly on the back of a widening fiscal deficit and higher debt burden. On the other hand, the affirmation of the Baa3 rating is supported by Mauritius’ diversified economy and proven institutional capacity, which have historically managed economic challenges.
As such, the nation is well-positioned for sustainable growth, contingent on addressing fiscal strains and other challenges through innovative and inclusive policies. The newly elected Government has pledged to introduce constitutional reforms aimed at enhancing democracy and freedom, which are expected to bolster the overall economy. Additionally, the administration has expressed its commitment to stabilizing the Mauritian Rupee, further strengthening the country’s economic foundation.
This is a commentary and comments are welcome by email to: info@eaa.co.ke