Mauritius

Country Summary

Economic performance and outlook: The economy continues to expand steadily, with GDP growth estimated at 4% in 2017, edging up from 3.9% in 2016. Services contributed the most to growth in 2016, notably financial services (which grew 5.8%), tourism (which grew 5.5%), and information and communication technology (which grew 5.3%). Growth was underpinned by higher household consumption. However, investment remained weak, falling to 17% of GDP in 2016, well below its recent high of 25% in 2012. The short-term economic outlook is positive. GDP growth rates are projected to increase to 4.2% in 2018 and 4.3% in 2019, due to stronger investment, an increase in tourism, and an expected increase in external demand following stronger regional and global growth. 

Macroeconomic evolution: The fiscal deficit is expected to narrow slightly to an estimated 3.4% of GDP 2017, from 3.7% in 2016, and to decrease further in 2018, as the government implements fiscal consolidation measures and improvements in tax collection. The Bank of Mauritius continued to loosen monetary policy—the policy (repo) rate dropped from 4% in July 2016 to 3.75% in September 2017. The accommodative monetary stance of the Bank of Mauritius was widely considered appropriate in light of persistently low inflation, as low as 1% in 2016. However, inflation rose in 2017 as a result of anticipated increases in energy and food prices. The current account deficit increased from 4.4% of GDP in 2016 to an estimated 5.8% in 2017. The deficit is likely to widen in the short term, given the anticipated increase in private investment and the strong import component of the government’s public infrastructure program. 

Tailwinds: The medium- to long-term growth prospects are positive; key sectoral growth drivers are expected to continue performing well. Financial services, information and communication technology, retail and wholesale trade, and food processing are all likely to grow more than 5%. The economy is expected to diversify further into other higher value-added sectors, such as medical tourism and higher education services. A favorable business environment and recently adopted business-friendly regulations, such as the Business Facilitation Act, are expected to contribute to higher growth in foreign direct investment flows to the economy; an anticipated improvement in global economic demand is likely to boost exports of goods and services, as well as tourism arrivals and receipts. Government efforts to re-position Mauritius as a gateway for investment between Asia and Africa and further diversification of the country’s export markets are expected to boost the wider economy and consolidate the economy’s position as a regional services hub for Africa. 

Headwinds: Increases in global energy and food prices are expected to hurt the economy’s current account balance and add to inflationary pressures, with headline inflation likely to reach 4.6% in 2018. Projected increases in recurrent expenditure and a narrow tax base are likely to limit the fiscal space needed for infrastructure and human capital investment. Other factors that may limit growth potential include government bureaucracy, insufficient capacity to innovate, and skills constraints, which hamper economic development and contribute to unemployment, which remains stubbornly high at 7.5%. Furthermore, institutional constraints may undermine efforts to speed up public investment and improve public service delivery.

Source: African Economic Outlook 2018

Fixed Income

N/A

Guide to Buying Bonds

Procedures for market participation

Participation in Government of Mauritius securities sales can be achieved through 3 avenues: direct-bidding, Primary Dealers (PDs) or secondary market trading. Direct access to primary auctions is only open to Mauritian citizens or residents. Foreign Financial Institutions can submit their bids through Primary Dealers or licensed Stockbrokers. 
In the secondary market, individuals and corporates can purchase Treasury bills by contacting any of the twelve PDs appointed by the Central Bank. Non-residents are allowed to participate in the secondary market through a Primary Dealer.

Settlement cycle

Settlement for Government of Mauritius Treasury Bonds (GMTB) is T+0.
The settlement cycle for all government securities but GMTB is T+2 days.

Taxation

Residents and non-residents are subject to the same withholding tax rate of 15%. Residents can apply for an income threshold exemption, depending if they have and the number of their dependents. Non-residents can apply for an exemption if the interest received is from a bank or a non-bank deposit taking institutions. Only tax payments in excess of Rs.500 are deductible. 
Mauritius has concluded Double Taxation Agreements with 38 countries, among which the following 14 African countries (Botswana, Lesotho, Madagascar, Mozambique, Namibia, Rwanda, Senegal, Seychelles, South Africa, Swaziland, Tunisia, Uganda, Zambia and Zimbabwe. 

Agreements with Kenya, Congo, Nigeria and Gabon await ratification while that with Ghana awaits signing.

Market restrictions

Openness to international investors

Foreign investors are invited to participate to the Mauritian capital (debt and equity) markets. Currently, trades by foreign investors account for 40 to 50% of the daily trading volumes on the Stock Exchange of Mauritius (SEM).

Being an export and tourism driven economy, Mauritius has undertaken several initiatives to encourage foreign investment. The government offers a variety of investment incentives including:

  • A corporate tax exemption of at least 10 years
  • Free repatriation of profits, dividends, and invested capital
  • Waiver on income taxes on dividends for 10 years
  • Exemption from capital gains tax

Capital controls

There are no capital controls in Mauritius; they were abolished more than two decades ago.

Restrictions on foreign exchange and profit repatriation

Exchange controls were suspended in 1994, allowing foreign investors to freely repatriate their profits. 
The Exchange rate regime in Mauritius is a managed float; the BoM limits its interventions in the foreign exchange market largely to smoothening volatility. 

Credit rating

Last credit rating dates back in June 2013: Moody’s maintained the Mauritian sovereign debt rating of Baa1 reflecting the demonstrated resiliency of the economy to shocks and the stable and investment-friendly environment. Fitch and S&P did not rate Mauritius in 2013.

List of Primary Dealers

The list of Primary Dealers has been reduced from 12 to 11.