Socioeconomic Development 854. Chapter 6 Sustained efforts and development programmes, which Mauritius planned, controlled and conducted rationally, resulted in its classification as an upper medium-income country after about 40 years of independence. Mauritius developed and implemented comprehensive development plans until the middle of the 1990s. These helped the country to include its different projects and activities within an integrated framework and a global vision. Mauritius developed Vision 2020: A National Long-term Perspective Study in the middle of the same decade through a wide process of consultation initiated by two successive governments (1994 to 1997). Vision 2020 moves the economic development of Mauritius from a labour-intensive and poorly paid economy to a knowledge economy where exports flow from highly skilled labour. Development institutions 855. 856. 857. Mauritius has competent administrators and highly qualified managers. It has institutions and human resources capable of developing, implementing, monitoring and evaluating development strategies and policies for all sectors and at national, regional and local levels. They can also convert them into appropriate budgets quickly. There have been some remarkable sectoral achievements in Mauritius. The 2025 Energy Policy and the 2020 Education Development Strategy, which are being developed, are some of them. However, its rigorous management of projects and expenditure have not been accompanied by improvements to its medium- and long-term strategic vision or to its sector policies. Financial and budget planning, within a triennial framework, seem to have replaced the planning of development and medium-term sector policies. Two financial rules were introduced between 2006 and 2008. They limit current expenditure and public debt. Programme-based budgeting (PBB), the Performance Management System (PMS) and the MTEF were introduced between 2006 and 2009. Financial autonomy 858. 298 Chapter 6 Mauritius has virtually received no development aid since the beginning of the 1990s. Its budget relies almost entirely on its own resources. However, external debt has risen significantly in recent years, in response to the requests of the Mauritian government, as the country faced the dismantling of the MFAs and as trade preferences Socioeconomic Development for sugar were gradually abandoned. Abolishing these two could, according to the World Bank, cost between 8 and 9 per cent of GDP, 20 per cent of export earnings and 40 per cent of the public revenues of Mauritius. To deal with this and the shock of the world financial and economic crisis, as well as to encourage major investments for 2009 to 2013, the authorities benefited from a loan to support their development policies. The World Bank, the European Community, the ADB and the French Development Agency funded the loan jointly. This support, which amounted to USD157.4 million in 2008, reached USD397.4 million in 2009 and will reach USD230 million in both 2010 and 2011. Consequently, the share of external debt should increase from less than 1 per cent to between 5 and 6 per cent in the future. It is associated with a particular economic situation that should virtually disappear after 2013. 859. This financial assistance takes the form of budgetary support under the PBB coordinating mechanism that Mauritius is harmonising. 860. Mauritius has partly contained public sector and external debt. The current administration intends to reduce and manage them strategically. Public debt as recently as the 2004-2005 fiscal year amounted to more than 70 per cent of GDP49, buts has since fallen to about 48.6 per cent in the 2007-2008 fiscal year. About one-tenth of this is owed to external and nine-tenths to domestic sources. This domestic public debt is mainly short-term. That is why it was necessary to develop and implement a strategy for managing debt. Box 6.1: Debt management strategy This debt management strategy is intended to be the primary policy tool for managing public sector debt. The strategy sets the objectives for managing government and public sector debt portfolios. The strategy also sets benchmarks for controlling risk and the medium-term targets for the composition, currency mix, interest rate mix, maturity profile and relative size of public sector debt as required by section 9(2) of the Public Debt Management Act of 2008. The ceiling for 2008 is 60 per cent of GDP. Mauritius intends to reduce it to 50 percent of GDP by the end of December 2013. Section 9(1) of the act sets the strategic objectives for managing debt in Mauritius. These are: • • • To meet the borrowing needs of government in a manner that avoids market disruption. To reduce the cost of the debt portfolio within an acceptable level of risk. To support the development of a functional market for government securities. 49 - December 2008 IMF Country Report No. 08/373 299