“Political stability cannot be taken for granted

Interview: Sameer Sharma, Economist & Financial Risk Manager

It hinges on policies that are not only economically wise but also socially just”

* Pensions Reform: ‘Mauritius can, and should, aspire to preserve its welfare state. The solution is neither austerity nor abandonment, but transformation’

* ‘The MIC’s portfolio is loaded with mispriced, overvalued, and even some toxic assets with very low recovery rates’

* dual chairmanship of BOM and FSC: ‘International best practice favours a clear separation of powers, not their concentration’

In a period of increasing political and economic uncertainty, a recent series of events at the Bank of Mauritius has brought the issue of institutional governance to the forefront of national discussion. The public feud between the Governor and the former Second Deputy Governor, which culminated in a high-profile dismissal, has raised serious questions about the bank’s autonomy and leadership. This week’s interview with Sameer Sharma, economist, investment analyst and financial risk manager, explores the underlying causes and implications of these events. It delves into the broader economic challenges facing Mauritius, from the “middle-income trap” to the future of the welfare state and considers whether a fundamental shift in policy and leadership is needed to secure the country’s progress.

Mauritius Times: Last week, we witnessed a first in the history of this country: an ongoing spat between Rama Sithanen, Governor of the Bank of Mauritius (BOM), and the former Second Deputy Governor, Gerard Sanspeur, which culminated last Friday in the latter’s dismissal. Accusations and counter-accusations were bandied about in public. This begs the question: How can an institution like the central bank maintain public trust when its top officials are embroiled in personal and institutional feuds?

If I may offer an economist’s perspective, the recent events at the Bank of Mauritius underscore a deeper, persistent challenge: the politicisation of key institutional appointments.

Both Dr Sithanen and Mr Sanspeur, in their public statements, made conspicuous efforts to commend the Prime Minister’s leadership — a gesture that, while perhaps intended as deference, also highlights the prevailing tradition of favouring political allegiance over a merit-based selection process.

Until appointments to critical positions, such as those at the central bank, are governed by rigorous criteria — evaluating candidates’ expertise, emotional intelligence, and demonstrable experience — we are likely to witness further episodes that compromise institutional autonomy across key institutions of this country. 

It is difficult to reconcile true central bank independence with a system that rewards loyalty over professional merit, and this structural deficiency poses significant risks to public trust and central bank credibility in Mauritius.

* Prime Minister Navin Ramgoolam’s decision to dismiss Gérard Sanspeur instead of Governor Rama Sithanen (as suggested by the Deputy Prime Minister) seems aimed at keeping political control, while managing a delicate power balance with his alliance partner, Paul Bérenger. What does this reveal about his leadership style?

Mauritius teeters on the threshold of transformation but remains ensnared by the familiar constraints of the so-called middle-income trap.
As an economist, I cannot help but observe — perhaps with a touch of pessimism — that the nation’s leadership continues to revert to well-worn patterns, eschewing bold vision in favour of the comfort afforded by precedent. The rhetoric of change persists, yet meaningful action is scant. Unlike countries such as Singapore, which in the 1980s enacted sweeping reforms under visionary leadership, Mauritius appears hamstrung by its reluctance to embrace far-reaching structural change.

The present moment demands courageous, enlightened policy — a paradigm shift fit for the realities of the Fourth Industrial Revolution. Until our leaders abandon their habitual reflexes and resist the gravitational pull of “business as usual,” the prospect of escaping the middle-income trap will remain, at best, a distant hope.

* The dispute between Sanspeur and Sithanen centred on specific issues — refusal to conduct an audit of the Mauritius Investment Corporation (MIC), an alleged conflict of interest in the Sotravic affair, the dismissal of the BOM union president (which Sanspeur considered “inhumaine”), per diems, and other matters. Since all these relate to governance and transparency at the BOM and the MIC, does this point to the need for systemic reform at the BOM?

In examining the Bank of Mauritius, one is compelled to confront the stark contrast between its trajectory and that of world-class central banks such as the Monetary Authority of Singapore (MAS), the Bank of England, or the Bank of Canada. These institutions have, over decades, fostered a culture that prizes expertise, intellectual independence, and the rigorous pursuit of excellence. Their appeal as employers lies not only in competitive remuneration or the prestige attached to public service but in their unwavering commitment to meritocracy and the sanctity of institutional autonomy.

At the MAS, for example, recruitment and retention of top-tier talent are seen as foundational to its success. The central bank invests heavily in continuous professional development, encourages its staff to publish independent research, and ensures that career advancement is tied to performance and demonstrated skills rather than political favour.

Likewise, the Bank of England and the Bank of Canada have become magnets for economists and technocrats who are drawn to their tradition of independent thought, transparent governance, and long-term strategic vision. These central banks do not merely weather political cycles — they are deliberately insulated from partisan winds, allowing them to pursue stable macroeconomic policy and financial oversight.

* Do you think politicization has significantly weakened the Bank of Mauritius?

Indeed. The case of the Bank of Mauritius reveals how institutional decay is rooted in politicisation and the erosion of autonomy. The revolving door of politically motivated appointments at the level of some departments has undermined the bank’s ability to recruit, develop, and retain the calibre of professionals necessary for a modern central bank.

As a result, many of the country’s most talented economists and financial experts have sought opportunities elsewhere, leaving behind an institution hollowed out by patronage and short-termism. There is little incentive for staff to engage in rigorous research or to challenge prevailing orthodoxies when promotion is perceived to hinge on personal allegiance rather than professional merit.

This dynamic has had pernicious consequences for the Bank’s performance across its core mandates. Its record on inflation control has been, at best, mixed. The failure to maintain consistent financial stability, as evidenced by crises such as those surrounding the Mauritius Investment Corporation Ltd and the recurring instability in the banking sector driven by an amateurish licensing process (e.g. Silver Bank), is symptomatic of deeper structural malaise. The Bank’s ability to ensure orderly currency management has likewise been compromised, with persistent liquidity mismatches and foreign exchange pressures reflecting both operational shortcomings and the broader credibility gap.

Ultimately, the institutional rot at the Bank of Mauritius is not a function of fate, but of choices: a sustained preference for political loyalty over professional excellence, and a reluctance to embrace the reforms that have enabled central banks elsewhere to thrive. Until Mauritius reclaims the principle of meritocracy and shields its key institutions from political interference, the central bank will remain a cautionary tale — one defined not by visionary stewardship, but by the squandered promise of its people and its mission.

It is a regrettable phenomenon (which peaked between 2018 and 2024), observed all too frequently in the corridors of Mauritius’s institutions, that political appointees — often bereft of the requisite expertise in central banking or capital markets — are swiftly overtaken by an unfounded sense of omniscience. Endowed by the imprimatur of political favour, they frequently mistake nomination for mastery, allowing personal ego to eclipse the humility required for sound economic stewardship.

The consequence is a pronounced disregard for the counsel of seasoned professionals, undermining the very foundation upon which prudent monetary policy and institutional credibility must rest. In a nation of modest scale, such hubris is particularly corrosive, for effective central banking demands not only technical acumen but also the capacity to listen, to learn, and to value the disciplined voices of experience over the fleeting certitudes of power.

* Do you also think that the lingering questions surrounding the MIC’s operations, highlighted during the Sithanen-Sanspeur dispute, demand a full audit to uphold financial accountability, and if so, what will it likely reveal?

Put simply, the MIC’s portfolio is loaded with mispriced, overvalued, and even some toxic assets with very low recovery rates.The fact that so many local financial gurus thought that the MIC was a sovereign wealth fund does not say a lot about our international financial centre. Mauritius is a back-officehub and our nominees do not have experience in this field.

Mauritius also has a very underdeveloped and illiquid capital market ecosystem with few exit opportunities. For real transparency and stability, a thorough forensic audit is essential — then, execute a structured asset disposal plan to clean up the Bank of Mauritius’s balance sheet and contain losses. Losses cannot be avoided but the goal is to minimize them.

The Bank of Mauritius (BoM) needs professional guidance through the process of removing the MIC assets from its balance sheet while safeguarding the nation’s financial stability. Clarity and precision are paramount. Let me break down the essentials:

1. Start with a True Forensic Audit

The first step is a comprehensive, independent forensic audit. This is not a casual review; it is a meticulous examination of every asset, transaction, and valuation within MIC’s portfolio. A global leader like Alvarez & Marsal (A&M) exemplifies the gold standard here and goes well beyond what the locally favoured Big 4 accounting firms can even provide.
We are dealing with private markets here and this is not a traditional accounting exercise. The likes of A&M have a global track record, having navigated the collapse of Lehman Brothers, untangling complex derivatives and ensuring creditors were paid in an orderly wind-down. In sovereign crises — be it Puerto Rico’s debt restructuring or Iceland’s banking collapse — A&M’s job was to ensure transparency, prevent misuse of bailout funds, and restore trust. That’s the calibre of expertise Mauritius needs right now.

2. Engage a Specialist Investment Bank

Once the portfolio is audited, you need an investment bank — not just any bank or small-time local advisor, but one with a proven Financial Sponsors Group (FSG). What does this mean? Leading global banks (Goldman Sachs, J.P. Morgan, Morgan Stanley, Barclays, UBS) and elite boutiques (Lazard, Moelis, PJT Partners, Rothschild) have teams dedicated to serving private equity, sovereign funds, and complex asset managers. Their real value lies in:

• Originating and structuring deals for asset sales
• Crafting strategies for exits — whether divestments, IPOs, or private placements
• Maximizing value in illiquid markets through deep global networks
• Ensuring the process is insulated from political interference and anchored in rigorous, independent valuation

The right advisor will not only find buyers and come up with out-of-the-box ideas but will negotiate on BoM’s behalf to secure the least painful exit for BoM, given the realities of Mauritius’s underdeveloped capital market.

3. Consider Specialized Alternative Advisors

For certain assets, you may need specialist infrastructure or alternative asset managers. Funds like Macquarie or Brookfield have expertise in repositioning and selling infrastructure stakes. For market-wide asset management, BlackRock’s Financial Markets Advisory (FMA) division is world-renowned, though they expect technical acumen and a clear mandate from their government clients.

The Bottom Line

So far the MIC has only managed to recover Rs 3.1Bn with a further Rs 4Bn in verbal commitments by year end. The recently quoted Rs 28 Bn figure is inaccurate as it also includes money that the MIC has never disbursed and hence that the Bank never really printed and put into circulation.

Mauritius cannot afford to treat this exercise as a box-ticking operation handled by inexperienced political nominees playing forensic auditor, investment banker and fund manager at the same time, especially when dealing with assets like airports and airlines. You must bring in world-class, independent professionals — yes, it will cost money, but the price of inaction or amateurism is far higher.

A credible forensic audit, an experienced investment banking team, and, where needed, specialized asset managers are the foundation for cleaning up the BoM’s balance sheet, restoring confidence, and protecting the country’s future.

* There is also the issue relating to the dual chairmanship of both the BOM and the Financial Services Commission (FSC). It has been argued in some quarters that while a single chairman might aim to improve coordination, the dual role presents significant risks to good governance. What’s your take on this?

The question of whether Mauritius should vest such sweeping powers in its central bank governor — spanning from monetary policy to banking supervision, MIC and now, ambitiously, oversight of the offshore sector and non-bank financial institutions — deserves serious scrutiny. As an economist, I underscore that international best practice favours a clear separation of powers, not their concentration.

Consider the models followed by countries with robust financial sectors. In the United Kingdom, the Bank of England is responsible for monetary policy and, through the Prudential Regulation Authority (PRA), oversees banking supervision. The Financial Conduct Authority (FCA), a separate entity, regulates non-bank financial institutions and the broader conduct of financial markets.
In Canada, the Bank of Canada focuses strictly on monetary policy; banking supervision falls under the Office of the Superintendent of Financial Institutions (OSFI), and securities are regulated provincially.
The United States is, perhaps, the archetype of regulatory pluralism, with the Federal Reserve shaping monetary policy, the Federal Deposit Insurance Corporation (FDIC) supervising banks, and the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and other bodies overseeing non-bank and offshore sectors.
Switzerland also maintains a separation of roles: its central bank watches over monetary policy while the Swiss Financial Market Supervisory Authority (FINMA) regulates financial institutions.

These countries have deliberately steered clear of the “one ring to rule them all” model. They recognise that concentration risks not only operational overload but also undermines transparency, accountability, and good governance. When a single, politically appointed office holds too many critical responsibilities, it increases the potential for conflicts of interest, dilutes its independence, and compromises its agility in responding to sector-specific crises.

For Mauritius, there is much wisdom in resisting the impulse to centralise. The Bank of Mauritius (BoM) should focus on its core mandate: ensuring monetary and financial stability, maintaining price stability, and acting as lender of last resort. Expanding its remit via the Governor’s chairmanship to cover the offshore sector and non-bank financial institutions risks blurring lines of accountability and stretching resources thin, especially in a rapidly evolving financial landscape. Such concentration may also expose the system to political pressures that could undermine its credibility and effectiveness.

Instead, a framework of specialised, independent regulators — each with a clear mandate and robust oversight — will foster sound governance, attract investor confidence, and enable nuanced responses to complex sectoral developments. Mauritius should aspire not to regulatory omniscience, but to regulatory excellence — allowing the BoM to aim not for “the moon and sky,” but for targeted, world-class stewardship of monetary policy and financial stability.

* On the other hand, the inability to appoint to date a Board Chairman and CEO — with the “Fit and Proper” test blocking candidates like Manou Bheenick and Gervais Gua — points to deeper issues than the test hurdle. What are your thoughts on this matter?

Based on my personal experience working under Manou Bheenick when he was Governor of the Bank of Mauritius, he is one of the most brilliant minds I have ever met. It pains me to hear that he has not been given the “fit and proper” green light.

Globally, the appointment of senior officials at regulated financial institutions is subject to rigorous “fit and proper” assessments conducted by supervisory authorities. These evaluations consider criteria such as professional competence, integrity, financial soundness, and independence from conflicts of interest. Crucially, such assessments are performed by dedicated regulatory teams — not by central bank Governors or their deputies, who are explicitly excluded from direct involvement to preserve impartiality.

The process is anchored by robust checks and balances, including opportunities for independent review or appeal if a candidate is deemed unsuitable. This ensures the outcome is not only fair, but transparently so — critical to maintaining trust in the system.

In the case of government-majority-owned entities like the State Bank of Mauritius, persistent interference and political appointments can always undermine both governance and market confidence. Just look at the relative stock performance of SBM compared to MCB.

The sustainable path forward is clear: the government must gradually withdraw from direct management of commercial enterprises, allowing professional boards and independent regulators to oversee appointments through established, transparent processes. Effective depoliticisation — where merit and integrity, not connections or preferences, guide selection — will foster institutional strength, attract investment, and safeguard the long-term stability of Mauritius’s financial sector.

* When it comes to the economy, economists argue that the interplay of local and global factors, including the uncertainty around Trump’s tariff policies and the lingering effects of the economic policies of past governments, makes forecasting particularly difficult. That said, do you see scope for a near-term rebound, or do the risks of a looming recession weigh more heavily?

Recent developments in the global economy underscore a pronounced divergence in growth trajectories and resilience across regions. In the United States, approximately a third of states are experiencing mild recessionary pressures, and indicators suggest the likelihood of a brief, shallow recession at the national level. Nevertheless, the dynamism and innovative capacity of American firms, particularly in emergent industries, remain robust and will likely act as a buffer against the adverse effects of tariff escalations. In contrast, Europe continues to contend with persistent fiscal and structural challenges, while China’s economy, though stabilizing, must navigate complex transitions inherent in its evolving growth model.

These global variations highlight an essential point: economic prospects increasingly hinge on the ability of nations to harness opportunities presented by the Fourth Industrial Revolution. Countries that cultivate ecosystems conducive to innovation and adaptability will disproportionately benefit, while those that remain encumbered by legacy constraints will lag behind.

Turning to Mauritius, the domestic outlook is constrained by a constellation of interrelated structural impediments. High levels of public debt, unfavourable demographic trends, shortcomings in our education system, and a private sector oriented towards rent-seeking rather than productive competition pose significant challenges to sustainable growth.
Additionally, institutional politicisation, the prevalence of political appointees lacking meritocratic legitimacy, and a general resistance to reform have led to persistent inefficiencies and stunted progress. The result is an economy mired in the so-called upper-middle-income trap, unable to transition to high-income status.

Absent comprehensive market-oriented structural reforms — reforms that prioritise transparency, meritocracy, and the incentivisation    of innovation — Mauritius risks continued stagnation. It is imperative that policy-makers recognise the urgency of fostering a competitive environment, depoliticising key institutions, reducing the government’s imprint in running businesses and investing in human capital to unlock the nation’s full economic potential.

* The current discontent over pension reform is a symptom of a much larger, ongoing global battle over the welfare state. Based on what’s happening in countries like France, the UK, and Germany, it is highly likely that the defence of the Welfare State will become a central political and social battle for vulnerable groups and the middle class in the coming years. What about Mauritius’ welfare state? Can it be saved?

Permit me to address, from the vantage point of economic analysis, the crucial question of sustaining Mauritius’s welfare state. It is a fundamental misconception to suggest that the nation must choose between fiscal stability and social protection. In fact, a well-designed programme of market-oriented reforms — reforms in the competitive landscape, privatising inefficient state-owned enterprises via listings, developing local capital markets, rationalising public spending, embracing digital transformation, and nurturing genuine private sector dynamism — would not only enhance economic growth but also underpin the long-term viability of the welfare system itself.

The issue is not the affordability of the welfare state per se, but rather the allocation and deployment of national resources. If Mauritius were to invest more in its human capital, be more open to immigration, reduce waste, arrest rent-seeking behaviours, and incentivise innovation, it could expand the economic ‘pie’ and thereby secure the revenue base necessary to sustain robust social services.

The real obstacle lies in political inertia. The current cohort of policymakers appears reluctant to undertake the structural reforms that economic realities demand. Instead of recalibrating the state’s involvement in commercial activities and championing productivity enhancements, they find it expedient to target welfare spending — often at the expense of society’s most vulnerable — rather than addressing the inefficiencies that erode overall prosperity.

Mauritius can, and should, aspire to preserve its welfare state. The solution is neither austerity nor abandonment, but transformation — a move towards transparency, efficiency, and economic openness, which together would make social progress both sustainable and affordable.

* At the end of the day, one question that should also be addressed is this: Without political stability and strong, durable alliances, isn’t the country’s progress at serious risk in these uncertain times?

In these uncertain times, it is impossible to ignore the palpable sense of disillusionment that pervades our society regarding the current political leadership in Mauritius. Despite calls for bold transformation, we are witnessing the continuation of familiar policies — small-scale, cosmetic changes that do little to address the country’s entrenched challenges. This reluctance to pursue genuine reform has tangible consequences: highly skilled Mauritian professionals continue to leave in search of environments where merit and innovation are truly valued, further eroding our talent pool.

At the same time, tampering with the welfare state — often a lifeline for the vulnerable — while protecting rent-seeking behaviours or, as was previously the case, funnelling ultra-cheap bailouts to entrenched, rent-seeking segments of the private sector, risks undermining both social cohesion and political stability. Such actions not only threaten the sustainability of social protections but also signal that the status quo is being preserved at the expense of genuine progress and broad-based prosperity.

It is vital to recognise that Mauritius stands at a crossroads. The path to lasting economic and social advancement does not lie in half-measures or the preservation of vested interests. Instead, it demands a decisive break from the past: market-oriented reforms that foster transparency, meritocracy, and innovation across the public and private sectors. Only through systemic change and a commitment to empowering our human capital can Mauritius halt the outflow of talent, create new opportunities, and build the foundations for a stable and prosperous future.

Ultimately, political stability cannot be taken for granted. It hinges on policies that are not only economically wise but also socially just — policies that inspire trust, reward initiative, and invite all Mauritians to participate in shaping the next chapter of our national story.

Mauritius Times ePaper Friday 5 September 2025