The economic outlook of Mauritius is uncertain. The halt of tourism due to the Covid-19 pandemic has wreaked havoc on an economy dependent on dollars and euros. Now, a year later, the solutions implemented by the government seem counterproductive.
It starts with infamous extension of the CSG tax that is being proposed and marketed as a way for the people to help the country get back on its feet. Somehow, only the private sector employees are the ones that will have to incur this tax. The government specifies that the public sector will also contribute to this CSG but that they will be subsidised by the state. Unless I am mistaken, this means the private sector will pay CSG and that the private sector will also pay part of the public sector’s CSG. Have people forgotten that government subsidies consist of the contribution of all people? This proposed policy, in its current state, sends out a whiff of economic nationalism where state employees are given preferential treatment and it fits right into the “divide and conquer” narrative that has plagued other aspects of Mauritius through the years.
Second comes the choice to devalue the Mauritian rupee against the almighty dollar. Theoretically, in any other context, this is a common method for service-based economies to attract foreign money, be it in the form of investment, relocation of wealth or being more competitive as a tourist destination. However, it seems that while pulling the strings some may have forgotten that the current situation is far from typical. There is little competitiveness to be spoken of as long as the country remains only half open with a mish mash of procedures on Covid control. As for investors, the recent fiscal and political instability in the country did little to inspire confidence in local investments. What the measure did do though, was to raise the price of imports which resulted in an increase in the price of all commodities. The burden of this decision weighs heavy on the average household and while government officials have taken the time to secure their new vehicles, others have had to tighten their belts.
The last two budgets have revolved around infrastructure and construction which is an essential evolution for a country to move forward, but move forward towards what? The sectors the country has been built upon through the years need to undergo substantial change to restart the machine. Air Mauritius, an invaluable asset to a tourist economy is still teetering on the edge of the cliff. There has been absolutely no mention of what comes next for the Mauritian people, no direction regarding what industry needs to be exploited or what skills need to be developed to be competitive in the coming years. With a rising inflation rate, an increasing rate of youth unemployment and limited local markets to depend on, it is urgent that someone take the wheel and steer the country for the long term. So far, the political class has been too busy pointing fingers at each other rather than roll up their sleeves and take concrete and comprehensive action. Unfortunately, I do not see that changing anytime soon.