The International Monetary Fund (IMF) has urged Mauritius to accelerate fiscal and structural reforms to strengthen economic resilience, warning that heightened global uncertainty and the ongoing war in the Middle East are weighing on the island nation’s near-term outlook despite its resilient economic performance.
In its 2026 Article IV Consultation, completed on July 15, the IMF Executive Board said Mauritius’ economy expanded by 3.2% in 2025, supported by strong performance in tourism and financial services, although growth was tempered by a contraction in the construction sector.
The Fund said inflation eased in early 2026 before edging higher to 3.6% in April as the conflict in the Middle East pushed up global commodity prices. It projected economic growth to slow to 2.8% in 2026, reflecting weaker tourism demand and higher energy and food costs linked to the conflict, before gradually recovering to 3.2% over the medium term as investment strengthens.
The IMF also forecast inflation to accelerate to around 6.4% by the end of 2026 before easing toward the midpoint of the Bank of Mauritius’ 2% to 5% target range over the medium term.
Public debt remained a key concern, reaching 86% of gross domestic product at the end of June 2025 following higher government spending, and is expected to stay elevated through June 2026. Meanwhile, the current account deficit widened to 7.1% of GDP in 2025 and is projected to increase further to 7.4% in 2026 before narrowing gradually.
The Executive Board welcomed ongoing fiscal consolidation efforts but stressed that stronger measures are needed to place public debt on a sustainable downward path and rebuild fiscal buffers.
Directors called for tighter control of current spending, including pension reforms, while protecting vulnerable groups through targeted support. They also encouraged the government to strengthen domestic revenue collection and use any unexpected revenues, including potential gains related to the Chagos Islands agreement, primarily to reduce public debt.
On monetary policy, the IMF said the Bank of Mauritius should remain prepared to tighten policy further if inflation risks intensify. Directors urged the central bank to strengthen its monetary policy framework, improve forward-looking communication, maintain exchange rate flexibility, and safeguard its independence by adopting amendments to the Bank of Mauritius Act.
The IMF said financial sector risks appeared manageable but warranted close monitoring, particularly regarding real estate exposures, links between banks and the sovereign, cross-border financial flows, and the growing use of virtual assets. It also welcomed continued progress in strengthening anti-money laundering and counter-terrorism financing measures.
Looking beyond macroeconomic policies, the Fund said Mauritius should press ahead with structural reforms to boost productivity and competitiveness. It affirmed the need to mobilize underutilized labor, improve skills development, enhance the business environment, reduce structural bottlenecks, and strengthen climate resilience to sustain long-term growth and reduce external imbalances.
The IMF noted that risks to the outlook remain tilted to the downside, citing global uncertainty, geopolitical tensions, and elevated commodity prices, while potential upside risks include a possible revenue windfall related to the Chagos agreement and an easing of regional conflicts.
