Economic Crossroads: Tackling Debt, Pensions, and Public Trust

Opinion

By Jan Arden

In 2014, Mauritius presented a picture of economic stability. Public debt stood at approximately Rs 250 billion, or about 65% of GDP, a manageable figure given the nation’s successful rebound from the global financial crisis. Our vital institutions and State-Owned Enterprises (SOEs), meticulously developed since independence and generally led by dedicated professionals, proved resilient, neither faltering nor failing the nation.

Even amidst global emergencies, our banking sector and major insurance firms thrived, and our national carrier, Air Mauritius, remained a symbol of pride and strength. Steady leadership at the helm guided us through challenging economic seas, crucially without resorting to excessive borrowing, unsustainable public debt, or the dangerous path of printing money.

The Economic Landscape Post-2015

This period of stability began to change significantly from 2015. The architects of the then-ruling party’s victory, including seasoned Finance veteran Vishnu Lutchmeenaraidoo and former Prime Minister Anerood Jugnauth, were successively sidelined. The 2019 general elections saw the MSM, led by Pravind Jugnauth, and its allies secure victory with 37% of the vote, against 33% for the Labour Party and 21% for the MMM. A new political era had dawned, but its performance would later face severe sanctions from the electorate in 2024.

The true economic landscape inherited by the new government was laid bare by Finance technicians in the publicly released ‘State of the Economy’ report. This report starkly revealed the significant adjustments made to economic indicators and the extent to which the previous administration had driven the economy to a critical state. Public debt had alarmingly ballooned to a staggering Rs 640 billion, with debt servicing projected to demand nearly Rs 30 billion in 2025 alone. Simultaneously, the trade deficit had spiralled out of control, reaching approximately Rs 200 billion, creating an illusion of prosperity that belied the underlying fragility. The massive and opaque injection of printed money via the MIC/Bank of Mauritius fuelled inflation and led to consequential currency devaluation. Even before the COVID-19 pandemic, our national flagship carrier, Air Mauritius, entered receivership.

During the pandemic, while dialysis patients and their distressed families endured suffering, and some tragically succumbed, emergency contracts to suppliers reportedly became a highly lucrative business. Furthermore, the National Pension Scheme and Fund were controversially set aside, replaced by CSG (Contribution Sociale Généralisée) taxation on private sector employees and employers, with funds directed into government coffers, which, too, rapidly diminished. The scale of the problems left behind – from adjusted figures to allegations of murky and corrupt mismanagement – demands painstaking efforts from competent individuals now at the helm. It’s a challenging road, but one that is crucial for rebuilding public trust and economic stability.

Budget priorities: Reform and Public Sentiment

Difficult, if not drastic, measures were therefore expected in the first budget of Prime Minister Navin Ramgoolam, who also doubles as Minister of Finance. The key question was whether he and his team would dare to address an economy brought perilously close to “junk status” by Moody’s ratings. Would they rise above popularity concerns to do what many, including the World Bank in 2021, knew was indispensable: manage the abysmal financial legacy, keep social justice afloat, and consolidate existing strengths while sketching new avenues of development?

Many analysts and Business Mauritius have largely lauded the general thrust of the budget. However, trade unions and the common person have primarily focused on the reform of the unsustainable Basic Retirement Pension (BRP), which proposes a progressive annual increase of the eligibility age by one year, aiming to reach 65 within five years. In parallel, an expert committee will analyze the rapid replacement of the CSG, with its private sector-only taxation, with a revamped National Pension Scheme formula.

The government’s case is that this twin-pronged approach aims to make the pension system sustainable and align the eligibility age with most other countries within five years. There is no doubt that this is an emotive issue, and we can empathize with those whose retirement plans and expected lump sums will need rescheduling, and those whose manual jobs have left them with fragile health dispositions even by age 60. These individuals are not mere facts and statistics.

The Path Forward: Balancing Necessity with Nuance

A government by and for the people should be able to heed these concerns without sacrificing the need to reform an unsustainable pension system, where fewer and fewer working individuals will contribute to pay for an increasing number of retirees. If some less mechanistic thoughts were to adjust things, there may be a case for introducing some flexibility in an otherwise inevitable reform.

In France, the concept of “pénibilité” (arduousness) had to be introduced to salvage pension reform and make the pill easier to swallow. There have been suggestions that manual or heavy workers who wish to opt out at age 60 should have the opportunity to do so. Alternatively, the phasing could be extended over ten years rather than five for classified manual workers, meaning an increase of one year in eligibility age every two years.

A major reform involving deeply emotional values and attachments has to be seen in a slightly longer-term perspective, as the government rightly points out. However, achieving greater social justice requires some “doigté” and finesse in defining policy objectives and their implementation. This is particularly true when the population perceives little or no corresponding effort, even if symbolic, to curb the expenses related to the salaries, perks, and pensions of our ruling classes.

Some analysts observed a disappointing low turnout at the recent municipal elections. If that interpretation is correct, then the ruling dispensation has no interest in exacerbating an obvious public malaise. The successful navigation of this reform will require not just economic rationale, but also astute political and social sensitivity.

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The 3rd UN Ocean Conference: The Race to Save Our Seas

From the 9th to 13th June, around 60 heads of state will gather in an effort to halt the degradation of this vast marine ecosystem, which is essential to life on Earth. The overarching theme of the Conference is “Accelerating action and mobilizing all actors to conserve and sustainably use the ocean”. The Conference aims to drive urgent action to conserve and sustainably use the oceans, seas, and marine resources for sustainable development. Over a couple of prior days, the world’s marine scientists would have discussed the latest findings in workshops and made their recommendations on sustainability and the urgency of measures needed.

Sadly, but not surprisingly in Trump’s universe, the world’s most powerful economy, the USA, has refused participation in the discussions and resolutions around global warming, acidification, and overfishing, dismissing these concerns no doubt as fabrications of woke scientists or ideologues of leftist bent. As for us, our delegation headed by the PM himself is well accompanied. Alongside those concerns, they probably might be looking, either in the proceedings or on the sidelines of the Conference, to consider technical expertise and large financial investors to help our drive to a bluer economy and a safer marine environment.

Mauritius Times ePaper Friday 13 June 2025