March 2012 IMF Country Report No. 12/62
Mauritius: 2012 Article IV Consultation—Staff Report; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Mauritius Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2012 Article IV consultation with Mauritius, the following documents have been released and are included in this package: The staff report for the 2012 Article IV consultation, prepared by a staff team of the IMF, following discussions that ended on January 25, 2012, with the officials of Mauritius on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on February 29, 2012. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF. A Public Information Notice (PIN) summarizing the views of the Executive Board as expressed during its March 14, 2012 discussion of the staff report that concluded the Article IV consultation. A statement by the Executive Director for Mauritius.
The policy of publication of staff reports and other documents allows for the deletion of marketsensitive information.
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STAFF REPORT FOR THE 2012 ARTICLE IV CONSULTATION
February 29, 2012
Outlook and risks: The outlook for growth and inflation is broadly positive, although growth is likely to slow somewhat to below 4 percent. The external environment, particularly the export dependence on Europe is the largest risk for the outlook. Fiscal policy and public debt sustainability: The cyclical component of Mauritius’ fiscal balance is projected to be small. A less expansionary fiscal stance than currently projected by staff would contribute to building policy buffers and reducing relatively high debt levels. In the event of a deterioration in the external environment, automatic stabilizers should be allowed to work and limited fiscal stimulus could also be considered, particularly to help employment change and mitigate social costs. Fiscal adjustment should focus on public enterprises and better targeting of social protection. Monetary and exchange rate policies: The monetary policy stance is appropriate, but developments in inflation and excess liquidity need to be followed closely. The recent decline in year-on-year and core inflation point to lesser inflationary pressures for 2012. Staff estimates that at end-2011 the real exchange rate was broadly in line with fundamentals, but there is a need to reduce the current account deficit over time. The flexible exchange rate continues to play a useful role as a potential shock absorber; exchange rate interventions should be used primarily to limit excess volatility. Net international reserves appear fully adequate, but not excessive. Inclusive Growth: The poor have benefitted from economic growth, but less than richer groups in recent years. The social protection system could be better targeted to ensure that growth is inclusive. Revenue policies appear to be moderately progressive. Financial sector: Stress-tests indicate that the Mauritian banking system is wellcapitalized and resilient against many shocks. Supervisory coordination between the Bank of Mauritius and the Financial Services Commission (FSC) should be enhanced further to ensure that there are neither supervisory loopholes nor supervisory overlaps.
2012 ARTICLE IV REPORT
Saul Lizondo and Vivek Arora...