“Mauritius is approaching the end of one economic cycle rather than the end of its success story”

Interview Sanjay Matadeen, Economist

* ‘We should avoid creating the impression that every fiscal difficulty can be solved by repeatedly taxing the same formal businesses’

* ‘Mauritius must become a country where skilled people choose not only to work, but also to build their lives and raise their families’

Mauritius faces a defining moment. An ageing population, slower growth, rising fiscal pressures, labour shortages, geopolitical uncertainty and rapid technological change are testing the resilience of its economic model. In this wide-ranging interview, economist and senior lecturer at Middlesex University Mauritius Sanjay Matadeen assesses whether the country is prepared for these challenges and outlines the structural reforms he believes are needed to secure sustainable growth, stronger institutions and long-term prosperity.

Mauritius Times: Many countries are confronting demographic, economic, technological, and social pressures, yet many have taken difficult decisions and implemented reforms to address them. Is Mauritius doing enough to prepare for the challenges ahead? If not, what explains our reluctance or inability to take the necessary decisions?

Sanjay Matadeen: This question must be considered within the broader global context of what is increasingly described as a polycrisis: a situation in which several economic, geopolitical, environmental, technological and social crises occur simultaneously. Geopolitical tensions in the Middle East, the ongoing Russia/Ukraine conflict, and the ensuing global economic ramifications are live examples. The situation with the USA’s tariff wars is another example of how the world economic order is in turmoil. In fact, the situation has even moved from polycrisis to permacrisis; a situation of permanent crisis. This is the new normal.

The Mauritian economy is particularly vulnerable as it is a small, open island economy that depends heavily on imports, tourism, international trade, foreign investment, and financial services. However, the country is not starting from a position of failure. Mauritius still benefits from political stability, a relatively diversified economy, comparatively strong institutions, and significant foreign-exchange reserves. The unemployment rate, stagnating around 6%, does not represent significant economic risks. Structural weaknesses include labour shortages, skills mismatches, low productivity growth, and an ageing workforce. However, the country is relying on the achievements and economic structures of the past while the conditions that supported those achievements are rapidly changing.

It would nevertheless be incorrect to suggest that nothing is being done. Successive governments have introduced measures relating to pension reform, taxation, renewable energy, digitalisation, infrastructure, healthcare, economic diversification, and fiscal consolidation. The main weakness is that reforms have often been partial, delayed, reversed, poorly coordinated, or inadequately explained to the population.

⁠* ⁠Mauritius also faces fundamental questions about the sustainability of its economic model. Low productivity, heavy reliance on services, rising public debt, investment choices, declining export competitiveness, the cost of doing business, and the search for new engines of growth have all come under scrutiny. Has our economic model reached its limits? If so, what structural reforms are needed to build a more competitive, resilient, and sustainable economy?

I believe that the Mauritian economic model has reached the end of one development cycle rather than the end of its potential. The model that transformed Mauritius through sugar, textiles, tourism and financial services has served the country well, but it is no longer sufficient to sustain high growth in an era of permacrisis, ageing populations, artificial intelligence, geopolitical uncertainty and climate change, as I mentioned previously.

We are witnessing a gradual loss of competitiveness due to high operating costs, labour shortages, slower productivity growth and declining merchandise exports. Our economy remains heavily dependent on imports, making export-led growth more important than ever. The challenge is not that Mauritius has become a services economy, many successful countries are, but that we must move towards higher-value, export-oriented services while rebuilding our productive base. The objective should be growth driven by productivity, innovation and exports rather than relying primarily on consumption, construction and public spending,

The reforms required are therefore structural.

First, we need to improve the ease and cost of doing business by accelerating digitalisation, reducing bureaucracy and increasing the efficiency of public institutions. Second, we must redirect investment towards sectors that generate foreign exchange and high-value jobs, including advanced financial services, higher education, logistics, the blue economy, renewable energy and a reimagined tourism sector focused on sustainability and culture. Third, Mauritius needs a national productivity strategy linking education, skills development, technology adoption and business innovation. At the same time, we must tackle labour shortages through a coherent migration policy while encouraging higher labour-force participation among Mauritians.

Ultimately, the country has not run out of opportunities; it has simply run out of easy growth. The next phase of development will depend less on discovering one new economic pillar and more on creating a competitive, innovative and export-oriented economy capable of thriving in a world of permanent uncertainty.

* ⁠Public debt has become one of Mauritius’s central economic concerns. While borrowing can finance development, questions remain about debt sustainability, persistent budget deficits, the efficiency of public spending, fiscal discipline, and the financial risks posed by state-owned enterprises. Has Mauritius reached the point where a fundamental rethink of fiscal management is required?

Public debt has undoubtedly become one of Mauritius’s major economic challenges, but I do not believe debt should be viewed in isolation. A country can sustain a relatively high level of debt provided its economy is growing, public finances are well managed, and the borrowed funds are invested in productive assets that generate future economic returns.

The more worrying issue is the persistent budget deficit, the widening balance of payments deficit and the fact that economic growth has slowed to around 2.8%. If the economy does not grow fast enough, servicing the debt will become increasingly difficult, regardless of whether the debt is domestic or external. The priority should therefore be to create wealth and expand the productive capacity of the economy rather than focusing solely on the debt.

At the same time, Mauritius needs a fundamental rethink of fiscal management. Fiscal discipline should not mean indiscriminate spending cuts or the reduction of essential social services. Instead, it should focus on eliminating waste, improving the efficiency of public expenditure and ensuring that every rupee borrowed generates measurable economic and social value.

The recurring weaknesses highlighted in the Audit Report and the Public Accounts Committee demonstrate significant scope to strengthen public financial management. Greater digitalisation of government services, better procurement practices, rigorous evaluation of major public projects and stronger oversight of state-owned enterprises would improve accountability while reducing unnecessary expenditure.

Fiscal sustainability will ultimately come from combining prudent financial management with stronger export-led growth, higher productivity and greater private investment, rather than through austerity alone.

* State-owned enterprises (SOEs) remain vital to the economy, but recurring controversies have raised concerns about governance, political interference, accountability, and operational efficiency. Questions persist about their management. Is Mauritius’s model of state-owned enterprise governance still fit for purpose?

SOEs remain essential to Mauritius, particularly in strategic sectors such as energy, water and transport. Acemoglu and Robinson, two respected economists in the field of development economics, have demonstrated that countries prosper when their institutions are efficient, accountable, and capable of adapting to change.

Many of our public institutions were created in the 1980s, 1990s and 2000s to address the challenges of those decades. While they contributed significantly to Mauritius’s development, some have become outdated and have not evolved at the same pace as the economy. Recurring governance issues and operational inefficiencies suggest that several institutions now require fundamental reform rather than incremental adjustments.

The priority should be to modernise the governance and performance of our public institutions. Greater transparency is essential, and the recommendations of the Audit Report and the Public Accounts Committee should no longer remain recurring observations but should be translated into concrete action plans with clear implementation deadlines and regular public reporting on progress.

Every SOE should also undergo periodic independent strategic reviews to determine whether it remains fit for purpose, whether its mandate should be redefined, whether overlapping functions should be merged, or whether the institution has simply become outdated as the economy has evolved.

At the same time, accelerating digital transformation, strengthening financial controls and fostering a stronger culture of accountability and performance would significantly improve operational efficiency and restore public confidence.

As pointed out earlier, the quality of a country’s institutions largely determines its long-term economic performance. Modernising Mauritius’s public institutions is therefore just as important as reforming its economic policies if the country is to remain competitive in an increasingly complex global environment.

* The future of the pension system is a defining public policy challenge. Mauritius must balance the long-term sustainability of the Basic Retirement Pension against rapid population ageing, declining fertility, labour shortages, and political resistance. What principles should guide policymakers in building a financially sustainable, socially equitable system that protects future generations?

The debate on the future of the Basic Retirement Pension is undoubtedly one of the most important and heated public policy challenges facing the country. On the one hand, it has played a fundamental role in helping and comforting the elderly while remaining an important pillar of our social protection system. On the other hand, demographic trends such as an ageing population and declining fertility raise legitimate questions about its long-term sustainability.

This is not a uniquely Mauritian challenge; many countries are currently reviewing their pension systems as they face similar demographic pressures. The debate should therefore move beyond short-termism and focus on how we can preserve the pension system for future generations while maintaining social cohesion.

In my view, any reform of the pension system should be guided by three key principles: financial sustainability, social equity and intergenerational fairness. There is no single solution, and any changes should be gradual, evidence-based and developed through broad consultation with all stakeholders. The objective should not simply be to reduce public expenditure, but to ensure that the pension system remains affordable, protects the most vulnerable members of society and does not place an excessive financial burden on future generations.

At the same time, pension reform cannot be considered in isolation. It should form part of a broader national strategy that addresses economic growth, employment, labour-force participation, productivity and demographic change. Ultimately, a sustainable pension system will depend not only on how benefits are financed, but also on the strength of the economy that supports it.

* Doesn’t this make the restoration of strong and sustained economic growth the government’s overriding priority? Without higher growth, can the State realistically continue to finance and strengthen its social protection system while meeting the demands of an ageing population?

I believe that restoring strong, sustainable and export-led economic growth must indeed become one of the government’s highest priorities because, ultimately, economic growth is what finances our social model. A growing economy generates more employment, higher incomes and stronger tax revenues, giving the State greater capacity to invest in healthcare, education, pensions and other essential public services.

Conversely, if growth remains weak while expenditure continues to rise because of an ageing population and increasing social demands, the pressure on public finances will inevitably intensify. The debate should therefore not be framed as a choice between economic growth and social protection. The two are closely interconnected, and one cannot be sustained without the other.

At the same time, growth alone will not be sufficient. Mauritius must ensure that growth is accompanied by higher productivity, stronger exports, better-quality investment and more efficient public spending. Our development model has always been based on export-led growth, and we need to create new sources of foreign exchange and wealth to preserve our welfare state over the long term.

A strong economy is ultimately the best form of social protection because it provides governments with the resources needed to support the most vulnerable while ensuring that future generations are not burdened with an unsustainable fiscal position. The real challenge for policymakers is therefore to strike the right balance between promoting economic growth, maintaining fiscal discipline and preserving the social cohesion that has always been one of Mauritius’s greatest strengths.

* ⁠Given the current fiscal pressures, combined with heightened global uncertainty and the ongoing conflict in the Middle East, would you support introducing a temporary “Fair Share Contribution” or windfall levy on banks and large conglomerates? What would be the economic advantages and potential drawbacks of such a measure?

I would not reject the idea outright, particularly in the present context of fiscal pressure, weaker growth prospects and heightened international uncertainty. A temporary Fair Share Contribution could be justified where certain sectors have generated exceptional profits partly because of circumstances beyond their own productive effort, such as wider interest margins or concentrated market power.

Several European countries have introduced additional taxes on banks since 2022, although the design and results have varied considerably. Properly structured, such a contribution could provide short-term revenue to protect vulnerable households, finance essential public services or support productive investment without imposing the entire burden of adjustment on ordinary taxpayers. Mauritius also needs to rebuild fiscal space as growth slows and external risks increase.

However, I would approach such a measure with considerable caution. It should be temporary, clearly defined and based only on genuinely exceptional profits rather than normal business earnings. A broad or unpredictable levy on banks and conglomerates could weaken investor confidence, discourage private investment, reduce lending or lead businesses to pass the cost on to customers through higher fees and prices.

International experience shows that poorly communicated windfall taxes can create significant market uncertainty. The term “fair share” must also be applied consistently: the objective should not be to penalise successful companies, but to ensure that extraordinary gains contribute proportionately during an exceptional period. Any revenue collected should therefore be transparently ring-fenced for clearly identified social or economic priorities, with a fixed expiry date and parliamentary reporting on how the funds are used.

My position would therefore be one of conditional support rather than automatic endorsement. A temporary contribution may form part of a broader fiscal response, but it cannot replace structural reforms, stronger expenditure control, better tax administration and renewed economic growth.

Mauritius should avoid creating the impression that every fiscal difficulty can be solved by repeatedly taxing the same formal businesses, because this could eventually weaken the very investment and employment base on which public revenue depends.

* Mauritius faces a growing labour market dilemma: increasing dependence on foreign workers, youth unemployment, skills mismatches, outward migration of talent, low female labour force participation, and weak productivity growth. What reforms are needed to strengthen human capital, raise productivity, and ensure that the labour market supports sustainable long-term growth?

Mauritius needs a comprehensive labour-market strategy rather than a series of isolated measures. The country is increasingly dependent on foreign workers while, at the same time, many young people struggle to find suitable employment, skilled Mauritians leave for opportunities abroad, and female labour-force participation remains relatively low.

This apparent contradiction reflects a deeper mismatch between the skills produced by the education system and those required by employers. Education and training must therefore be more closely aligned with sectors that can generate future growth, including logistics, financial services, healthcare, digital activities, renewable energy, specialised manufacturing and the blue economy. Greater emphasis should be placed on technical education, apprenticeships, reskilling and lifelong learning, rather than focusing almost exclusively on academic qualifications.

Foreign labour will remain necessary, particularly in an ageing society, but it should form part of a coherent productivity policy. Businesses should not use imported labour simply as a substitute for investment in technology, training and improved working conditions. Mauritius must also encourage more women to enter or remain in employment through affordable childcare and flexible working arrangements, while creating stronger incentives for skilled members of the diaspora to return or contribute to the economy. Ultimately, productivity will rise only when better skills are combined with technology, efficient management and investment. The objective should be to build a labour market that does not merely fill vacancies, but supports higher-value production, stronger exports and sustainable long-term growth.

* The issue of foreign labour raises at the same time important questions about housing, social integration, working conditions, demographic change, and national cohesion. What immigration and integration policies should guide the country over the coming decades?

Given our ageing population, declining fertility and persistent labour shortages, Mauritius will almost certainly continue to depend on immigration over the coming decades. However, immigration policy should no longer be driven solely by short-term labour shortages.

The country needs a comprehensive national migration strategy built around two complementary pillars. The first should address shortages in labour-intensive sectors such as construction, manufacturing, agriculture, tourism and care services. The second should position Mauritius as an attractive destination for highly skilled professionals, entrepreneurs, researchers and innovators who can help develop higher value-added sectors such as advanced financial services, fintech, artificial intelligence, the green economy, the blue economy, logistics, healthcare, higher education and scientific research.

Competing successfully for global talent will require much more than attractive employment opportunities. It will also require high-quality international schools, an efficient healthcare system, reliable public transport, affordable and attractive housing, a vibrant cultural and recreational environment, political stability, personal safety, environmental quality and an efficient public administration. In today’s global economy, talented individuals choose not only where to work, but also where they and their families want to live.

In a highly competitive international environment, countries are competing not only for capital, but also for talent. Mauritius must therefore become a country where skilled people choose not only to work, but also to build their lives and raise their families.

* AI has been identified as a strategic priority, but success will depend on digital infrastructure, skills development, regulation, sovereign AI capabilities, SME adoption, employment transition, and public-sector transformation. How prepared is Mauritius to harness AI, and what policies are needed to ensure it becomes a driver of inclusive development rather than greater inequality?

Mauritius has made some progress in recognising artificial intelligence as a strategic priority, but we are still at an early stage of implementation. We should also remain realistic: Mauritius is unlikely to compete with major economies in developing large foundational AI models or advanced computing infrastructure.

AI should therefore be viewed mainly as a powerful enabler that can improve productivity, public services, and innovation across existing sectors. To benefit fully, the country will need reliable digital infrastructure, secure data systems, stronger cybersecurity, better access to cloud computing and a much larger pool of people with skills in data science, software development, AI governance and digital regulation.

The real opportunity is to ensure that the benefits of artificial intelligence are shared across the entire economy. AI should not be seen as a tool reserved for government, banks or large corporations, but as a technology that enables businesses of all sizes to become more productive, innovative and competitive. Small and medium-sized enterprises should be supported through access to affordable digital solutions, financing, technical assistance and training so that they can integrate AI into their day-to-day operations.

At the same time, our schools, universities and training institutions must equip both young people and the existing workforce with the digital and AI-related skills needed to thrive in a rapidly changing labour market, while lifelong learning and reskilling become an integral part of workforce development. In many ways, measures presented in the last budget do address these requirements

A strong governance framework will also be essential to build public trust and encourage responsible innovation. Mauritius should continue strengthening its policies on data protection, cybersecurity, transparency and the ethical use of AI, particularly in sensitive sectors such as healthcare, finance and public administration. Our focus should be on building sovereign digital capabilities by protecting critical public data and developing the expertise needed to deploy AI securely and effectively.

If implemented strategically, artificial intelligence can become a catalyst for higher productivity, better public services, stronger businesses and more inclusive economic growth, helping Mauritius enhance its competitiveness in an increasingly digital global economy.

* In conclusion, how do you see the future for Mauritius?

I believe Mauritius is approaching the end of one economic cycle rather than the end of its success story. The development model that brought us this far will not be sufficient to take us through the next twenty or thirty years. We need to redefine our role in a world being reshaped by artificial intelligence, climate change, demographic transitions, and shifting geopolitical alliances. Rather than seeing our small size as a limitation, we should leverage our agility, our institutions and our strategic location to position Mauritius as a regional platform in areas where we have or can develop a comparative advantage.

One of Mauritius’s greatest opportunities is to build a stronger national innovation ecosystem where government, businesses, universities, research institutions, regulators and civil society work together towards a shared long-term vision. By strengthening collaboration across these stakeholders, Mauritius can accelerate innovation, attract high-quality investment, commercialise research, nurture entrepreneurship and develop the skills required for tomorrow’s economy

I am optimistic about Mauritius’s future because the country has repeatedly demonstrated its ability to reinvent itself.

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Mauritius Times ePaper Friday 17 July 2026

Tags:; public debt, Artificial intelligence (AI), Blue Economy, Competitiveness, Demographic Change, Digitalisation, Economic Diversification, Economic Growth, Export-Led Growth, Fiscal Discipline, Foreign Labour, governance, Human Capital, Innovation, Interview Sanjay Matadeen, Labour Market, Mauritius, Mauritius Times, Pension Reform, Permacrisis, Polycrisis, Productivity, Public Institutions, Renewable Energy, State-Owned Enterprises, Structural Reforms, Sustainability