Port Louis: The island nation of Mauritius, historically known as the habitat of the now-extinct dodo bird, is at a crossroads with its economy. The dodo, a national symbol, underscores the significance of sustainable practices in the country’s financial policies. Mauritius has evolved from an agriculture-based economy to a diversified, upper-middle-income nation. However, it currently grapples with high public debt, substantial public investment requirements, low productivity, and an aging population. Addressing these challenges necessitates a recalibration of fiscal policies to ensure sustainable economic prosperity.
According to African Press Organization, the new budget aims to increase fiscal revenue by discontinuing specific tax exemptions from VAT and excise duties, particularly those related to construction, real estate, and electric vehicles. The budget also proposes lowering tax payment thresholds and introducing new taxes. These reforms are designed to minimize potential adverse effects on economic growth while safeguarding the most vulnerable segments of the population.
On the expenditure side, making pension spending more sustainable presents an opportunity for reform. Benefits from the Basic Retirement Pension program (BRP), which serves all Mauritians aged 60 and older, have more than doubled since 2019. The nation faces increasing fiscal pressure due to a rising number of pensioners and an expected doubling of the old-age dependency ratio over the next thirty years. To mitigate these challenges, aligning the BRP eligibility age from 60 to the official retirement age of 65 is being considered. This adjustment aims to make the pension system sustainable, addressing intergenerational inequalities while protecting the most vulnerable citizens.
Moreover, there is potential for improving the efficiency of fiscal transfers. Current social subsidies often fail to reach the most in need, with only 11 percent of social aid program beneficiaries classified as poor. The proposed budget outlines plans to gradually reduce broadly targeted subsidies, thereby creating fiscal space for more targeted support schemes. This approach seeks to enhance the sustainability of fiscal policy while ensuring that aid reaches those who need it most.
