This Government’s fourth budget entitled “Pursuing our transformative journey” was delivered with a deep sense of enthusiasm and optimism. As expected, this year’s budget is a continuation of the vision to transform Mauritius into a high income economy. Key priorities remain social welfare and modernisation of infrastructure. Other landmark measures this year include the tax reforms in the Global business sector and strong signs of a gradual opening up to foreigners. The budget further adds on the building blocks of sustainability where fiscal prudence and institutional reforms will preserve the past achievements and continue our competitive positioning as a financial and regional hub. From an economic outlook perspective, the 2018-19 budget is expected to pursue a controlled path in terms of macroeconomic fundamentals, with growth forecast of 4.1%, a budget deficit of 3.2% and public sector debt of 63.4%.
Social inclusiveness: Socio economic welfare remains high on the Government’s agenda. Youth employability is enhanced through apprenticeship programmes and a new SME employment scheme. On the productivity side, a fresh “work@home” scheme with tax incentives for employers is being introduced. Education expenditure continues to feature prominently. The unacceptably high level of fatalities on our roads is being tackled in the form of significantly higher fines, revocation of driving licences and the introduction of probationary driving licences for new drivers.
Alleviation of the tax burden: The application of a one tax rate which was hailed as being simple and easy to apply, is no longer seen as being equitable. A fresh tax band of 10% is being introduced largely for the benefit of the middle income group, earning up to MUR650,000 p.a. The first MUR305,000 of income is exempt.
Financial Sector reforms: We have finally bowed down to international pressure on our global sector: GBC2s will disappear and fiscal regime for both domestic and global business companies will be harmonised.
Opening up to foreigners: Mauritius officially opens up to the world by enticing foreign HNWIs to obtain citizenship and Mauritian passports against payment of USD 1m and USD500k respectively. This is likely to generate fresh revenue for the public coffers, whilst ensuring Mauritius remains a destination of choice. Other schemes announced to this effect are a Foreign Manpower Scheme and a new package of facilities to attract foreign retirees.
Public infrastructure: The modernisation of our public infrastructure and regeneration which started in 2015 is well on track, with committed investments in the metro project, expansion of the road networks and development of smart cities.
Managing a transformation requires a slow but sure approach, or does it depend on what lies ahead?
The public accounts indicate a dependency on grants to achieve a 3.2% deficit as the country transforms itself from a services economy to an integrated business platform. In years ahead, harsh realities will emerge, such as spare asset capacity emerging from the contraction of the sugar sector, excess liquidity, an ageing population and a falling birth rate. The vision of a high income country by 2023, with a GDP per capita of USD13,600, implies that our economy will have to grow by an average of over 6% per year. Given the forecast growth of 4.1% for next fiscal year, there will have to be new avenues of incremental economic growth to help achieve this vision in the longer term. In such a future state of affairs, one would eventually question if the pursuit of a prudent transformation will be enough? …. Or should we as a country, be bolder with less reliance on government?
Click here to download a copy of our Budget Highlights 2018/19.