Mauritius is facing significant economic challenges, including high public debt and an ageing population. To address these issues, the Mauritian authorities have announced a budget for 2025-26 that focuses on sustainable fiscal policy reforms. These reforms aim to increase tax revenue by over two percent of GDP and reduce government spending by over one percent of GDP in the same period. The goal is to decrease government debt from 87 percent of GDP in 2024 to 75 percent by 2030.
A recent economic health check conducted by the International Monetary Fund (IMF) provides policy options for achieving fiscal sustainability in Mauritius. These include strengthening revenue mobilization, reforming the pension system, and increasing spending efficiency. The announced budget aligns with many of these proposed measures.
To boost fiscal revenue, the new budget plans to discontinue selected tax exemptions and introduce new taxes while ensuring minimal adverse effects on economic growth and protecting vulnerable populations. On the expenditure side, there is potential for making pension spending more sustainable. Benefits under the Basic Retirement Pension program have increased significantly since 2019, contributing to mounting fiscal pressures due to an ageing society.
The budget suggests gradually aligning the eligibility age for pensions with the official retirement age of 65 as a means to contain costs and address intergenerational inequalities. Additionally, there is room for streamlining broadly targeted social subsidies that often do not reach those most in need. Savings from reducing such subsidies will be redirected towards more targeted support schemes.
Mariana Colacelli, IMF mission chief to Mauritius, and Felix Simione, a senior economist in the IMF’s African Department, emphasize that securing fiscal sustainability is crucial for Mauritius' continued economic prosperity.