Mauritius finance minister looks to new economic model

Mauritius’ recently appointed minister of finance and economic development, Vishnu Lutchmeenaraidoo, has shaped the country’s economic growth story like few others. Between 1973 and 1980, Mr Lutchmeenaraidoo worked briefly as an economist for the country's Ministry of Commerce and Industry before assuming the role of commissioner for trade affairs. This was followed by his first foray into political life when he was appointed deputy prime minister and minister of finance in 1983, a post he held for the next seven years. 

This experience will be vital if Mr Lutchmeenaraidoo – who returned to the role of finance minister in 2014 – is to successfully execute his vision for the next stage of the country’s development. “The Mauritian economy is at a crossroads. The growth model that has served the country for decades is losing steam, and we have reached the end of an economic cycle. We must revive the system with a view to generating sustained growth and a higher rate of job creation. But we can only achieve this by initiating a paradigm shift in the way we develop and run our economy,” he says.

The consensus forecast for economic growth for 2015 in Mauritius sits at about 3.5%. Yet, by 2016, Mr Lutchmeenaraidoo expects to see the tangible outcome of his investment and reform programme as growth starts to gain momentum. “We are spending the best part of 2015 laying the foundations of a new economic architecture that aims to deliver a dynamic and entrepreneurial economy with new competitive strengths across industries. We are entering a phase of accelerated growth and we have every reason to believe that we will reach a situation of full employment by 2018,” he says.

Ocean economy

The development of Mauritius' ‘ocean economy’ is a key pillar of this economic reform programme. This includes the upgrade of the country’s main port facility, as well as a paradigm shift in the way that Mauritius conceptualises its exclusive economic zone.

“Mauritius is poised to again become the star of the Indian Ocean, a role that the island fulfilled in previous centuries by virtue of its strategic location on key maritime routes. Besides the port development and the regional maritime trade plans, the ocean economy offers new avenues for income generation: industrial fishing, and prospecting for oil and other resources,” says Mr Lutchmeenaraidoo.

Engaging with the rising potential of Africa is another priority. While Mauritius’s corporate and financial services sector has, for a number of years, made advances across the continent, only recently has this trend begun to achieve some kind of scale. In particular, Mauritian banks and sugar producers, as well as diversified family conglomerates, have been tapping into the potential offered by economies in east Africa, thanks to its shared heritage of UK company law.

“Mauritius is determinedly adopting an Africa strategy as part of this new economic paradigm. We want to be part of Africa’s impressive growth story. We have a two-pronged approach. First, our International Financial Services Centre is a vital link to route international investments into African countries, to build their infrastructure, industries, telecoms, energy generation and financial services,” says Mr Lutchmeenaraidoo.

“Second, we are developing special economic zones [SEZs] in the region and in mainland Africa – namely in Madagascar, Ghana and Senegal. These SEZs will give us a much larger footprint on the continent. New special purpose vehicles will be set up to mobilise the required financial resources to develop these economic zones.”

Inclusive growth model

Alongside these larger developmental ambitions is the new government’s desire to nurture an inclusive growth model. “We want to promote social justice and solidarity among the Mauritian population. We take the view that lasting economic growth cannot be achieved without social stability,” says Mr Lutchmeenaraidoo.

Data from the African Development Bank’s African Economic Outlook Mauritius 2015 report shows that the country’s Gini coefficient – a measure of income inequality – increased from 0.388 in 2006 to 0.413 in 2012. As noted by the report authors, this growing inequality is partly attributable to the maturation of the economy as it continues a broader evolution from an agricultural to a services-based model, in turn limiting the demand for unskilled labour.

“We are making sure that the fruits of economic development are fairly distributed among all the strata of the community," says Mr Lutchmeenaraidoo. "The former government had introduced reforms that have helped to widen wealth and income inequalities in the Mauritian society. We are reversing this trend and helping the most vulnerable segments of the population to connect to the mainstream."