Public Finance

Although the move to a means tested pension system is crucial, more needs to be done for sustainable public finances given lack of visibility on the Chagos fund (if any) and persistent budget deficits.

• The Island Container Terminal is a $1bn project in partnership with the Indian Government
• Rs4.7bn to modernise the airport and build the M4 road
• Individuals can elect to draw State Age Pension from age 60 to 70 and this will be means tested

Fiscal discipline is one of the ways to reduce indebtedness, but no country can continue to grow without capital expenditure. We would recommend that the Public Sector Investment Programme (PSIP) is benchmarked using independently derived Social Discount Rates and Economic Rate of Return. We would recommend that more projects are carried out under a Public Private Partnership (PPP) model to minimise the strain on government finances. 

We had highlighted last year that potential contingent liabilities identified in the State of Economy could derail any deleveraging scenario. Silver Bank is an addition to that list, with a quantum of loss of public funds still not fully quantified.

The previous Budget proposed Gross Debt/GDP ratio to 79.7% within 3 years. This has now been revised to 82.6%(FY27/28). This scenario appears ambitious as it depends on  the receipt of the Chagos funds and key cost cutting in the public sector.

We are still waiting on the planned introduction of the Fiscal Responsibility Act since last year.

Government needs to focus on limiting non-capital spending by trimming inefficiencies. A budget surplus target should not be viewed as an aberration but as a responsible Government in place.

All is not doom and gloom; instability in the Middle East have resulted in some surprising positive impact for the port sector. We commend all the stakeholders involved in developing this promising sector and urge authorities to finally execute the strategic plans to turn Mauritius in a strategic shipping hub.

According to the budget speech, the actual budget deficit stands at 6.0% of GDP, compared with the 4.9% previously budgeted, representing a shortfall of approximately Rs9.1bn.

Our analysis on the next page suggests that this gap is mainly due to a shortfall in lower tax receipts and funds from Chagos deal.

Public sector debt stood at Rs682bn in 2025/26, equivalent to 87.8% of GDP. The Government’s objective is to bring this ratio down to 79.8% over the next three years.

This trajectory assumes that the Chagos rental of Rs10.6bn as from next year. Alternatively, this ratio would remain above 83.1% till 2028/29

Despite a modest growth rate of 3.7% predicted in 2025/26, this has not materialised. We are sceptical whether the planned growth rates onwards will be achieved. Failure to achieve these will impact the Debt/GDP ratio further.

The inflation trend remains stable into 2025/26 with headline inflation estimated at 3.9%. The Government is expected to maintain inflation under control, with IMF projections at 3.6% for 2026/27 and 2027/28.

Total planned investment: Rs231bn

Made up mostly of port expansion, airport modernisation and road building.