Mauritius’s Economic Model: Time for a Reality Check

Editorial

For years, Mauritius has relied on reassuring economic indicators: respectable GDP growth, favourable international business rankings and repeated claims of economic resilience. Yet, for many Mauritian households, these figures have little connection with everyday life. Pressures like the cost of living, housing affordability, and entry-level wages point to underlying challenges. When public frustration escalates into unrest, it should be viewed in a broader context rather than as an isolated incident. As economist and financial risk manager Sameer Sharma observes in Mauritius Times, social unrest is closely linked to economic conditions, often emerging when citizens feel excluded from overall prosperity.

The Monthly Shopping Struggle. Pic – Cheapism

One of the main sources of this frustration is the growing gap between corporate profits and the performance of the wider economy. Between December 2019 and 2026, profits made by companies listed on the Stock Exchange of Mauritius increased by around 85% to 90%. Over the same period, nominal GDP grew by only 45% to 48%, even after a 9% statistical revision. In other words, listed companies saw their profits grow almost twice as fast as the economy. Meanwhile, inflation continued to reduce the purchasing power of salaried workers and middle-class families.

This imbalance has been made worse by the way land is used. In a country where land is limited, large areas of former sugar cane land have been converted into luxury residential developments. This has generated substantial capital gains for large, established landowners, often with relatively little tax paid on those profits. At the same time, ordinary professionals are finding it increasingly difficult to afford a home. The problem goes beyond income inequality. It also concerns the way businesses compete. The World Bank’s October 2026 report, Riding the Next Wave, points to weak competition as a major obstacle to economic growth. Large conglomerates and state-linked companies account for about a third of national revenue and employment, but their labour productivity is lower than that of more dynamic medium-sized businesses.

Smaller companies often struggle to expand because established groups control important parts of the economy, including distribution networks, imports, access to bank credit and port services. Mauritius may rank well internationally for the ease of registering a business, but starting a company is not the same as being able to compete fairly or survive. Many small businesses face barriers created by powerful economic interests.

The economic model that served Mauritius well after Independence is also losing momentum. It was built on preferential access to foreign markets, export-oriented manufacturing, high-end tourism and offshore financial services. These sectors helped transform the country, but they are no longer enough to sustain the next stage of development. Economic growth is now hovering around 2.7% to 3%, while the Government spends nearly Rs 30 billion a year on interest payments and other debt-servicing costs. This leaves less money for public investment and essential services. The challenge is becoming more serious as the population ages. With a fertility rate of 1.4 and almost one in five Mauritians expected to be over 65 by 2033, the pressure on pensions, healthcare and social protection will increase.

To sustain its welfare state and Basic Retirement Pension, Mauritius needs higher productivity and durable growth of 4% to 4.5%, economists warn—adding that relying on debt or a weaker rupee is no solution. Yet economic policy continues to rely too heavily on short-term measures, while the tax system remains unfair. Mauritius is not necessarily a high-tax country, with total tax revenue representing around 18% to 20% of GDP. The problem is how the tax burden is distributed. Salaried professionals pay income tax, while ordinary consumers bear indirect taxes. At the same time, gains from speculative land purchases, luxury property developments and certain forms of passive corporate income face a much lighter tax burden. Another concern is the nature of foreign investment. More than 70% of gross foreign direct investment inflows have reportedly gone into luxury property purchases by non-citizens. Such investments bring money into the country, but they do not necessarily create new industries, transfer technology or generate enough skilled employment. They can also push land and property prices beyond the reach of local families.

The Mauritius Investment Corporation (MIC) is another example of the need for greater accountability. During the pandemic, the Bank of Mauritius provided financial support to companies through the MIC. Unlike arrangements in some other countries, where commercial banks shared the risks, much of the potential loss in Mauritius was carried by the public sector. This raises serious questions about how public money was used and whether the interests of powerful business groups received too much protection. The consequences of monetary and foreign exchange policies have also been felt by the population through pressure on the rupee and rising prices. Sameer Sharma says in his interview that an independent international forensic audit of the MIC’s investments would help establish whether decisions were properly taken, whether public funds can be recovered and whether any breaches of duty occurred. Such an exercise should be about accountability, not political revenge.

The consequences of the present economic model are also visible in the growing departure of young professionals. Many graduates struggle to find well-paid jobs, while starting salaries often fail to keep pace with the cost of living. Young people with skills in technology, finance and other specialised fields are increasingly looking abroad for better opportunities. This loss of talent is particularly worrying for public institutions, including the Central Bank and essential public utilities, which need skilled and independent professionals to function effectively.

Reversing this trend requires more than repeated promises of diversification and capacity building, argues Sameer Sharma. It calls for concrete reforms.

First, the management of monetary policy and financial markets must be protected from political interference. The foreign exchange market needs to function properly, the backlog in foreign currency transactions must be cleared, and public debt must be managed more effectively. Mauritius also needs stronger domestic capital markets to provide businesses with alternatives to traditional bank financing. Second, the State must reconsider its role in commercial activities. It should not remain involved in businesses it cannot manage efficiently. At the same time, essential public services need clear performance targets and greater accountability. Losing large quantities of treated drinking water through leaking pipes, for example, is not simply a technical problem. It reflects a failure to manage an essential public resource properly. Finally, Mauritius needs a fairer tax system and a more competitive business environment. A targeted tax on the value of idle land and speculative property holdings could discourage land hoarding and encourage more productive investment. Active agricultural land should be protected to safeguard food security.

Taxes on productive work could be reduced, while small businesses could benefit from higher VAT registration thresholds. The tax system should also distinguish between profits generated through genuine innovation and those arising from market dominance or passive income. More support should go to advanced manufacturing, agricultural technology and software exports. The Competition Commission, meanwhile, must be given the authority and resources to tackle cartels and anti-competitive practices, particularly in import markets.

The real challenge is therefore not simply to achieve higher GDP growth. It is to ensure that economic progress improves people’s lives, creates decent jobs and offers young Mauritians a future at home. Social stability and confidence in democracy cannot be sustained through nostalgia, political patronage or temporary financial benefits. They require an economy that rewards hard work, gives businesses a fair chance to succeed and ensures that public institutions serve the interests of the whole country.

Mauritius Times ePaper Friday 6 November 2026