Sunil Boodhoo: "Targeting Makes a GM Unpopular and No One Wants to Take That Risk"
In light of international uncertainties and the war in Iran, Sunil Boodhoo warns about the vulnerabilities of the Mauritian economy, particularly high debt, deficit, energy dependence, and current account deficit. He calls for urgent structural reforms, economic diversification, and better shock management to preserve growth and purchasing power.
What overall assessment do you make of the Mauritian economy in the first quarter of 2026, against a backdrop of significant international uncertainties?
There are several internal and external factors affecting the Mauritian economy. Currently, external factors have a significant impact. The country's economic situation is not promising, with concerning levels of debt and budget deficit. However, inflation has been relatively controlled. That said, the inflation rate is expected to rise given the international situation. Our current account is severely in deficit, as our imports continue to rise while our exports decline. These are structural problems in our economy. There are sectors we cannot rely on because they struggle to compete globally due to production costs in Mauritius. We need to create new sectors and development hubs to become more competitive and bolster existing sectors.
Due to external factors, the war in Iran negatively influences Mauritius, which is a net importer of energy products and raw materials. Prices continue to rise without any visibility.
Some forecasts now suggest a growth rate of around 3% for Mauritius in 2026, assuming geopolitical tensions are contained. Conversely, a worsening of the conflict could reduce economic growth to around 2.3%. Would growth below 3% in 2026 be concerning for Mauritius, or could it remain sustainable in the current context?
A growth rate below 3% for Mauritius should normally be concerning. It would create an additional problem. Growth indicates the country's development and the generation of income. Social expenses are significant in Mauritius, and we need revenue to finance them alongside adequate growth. Public debt is also measured against GDP. If GDP falters, Mauritius' debt level will appear higher than it currently is.
In March 2026, overall inflation slowed to 2.7% year-on-year, down from 3.5% the previous month. This deceleration could suggest a trend towards alleviating immediate price pressures. How do you explain the discrepancy between the slowdown in inflation to 2.7% and the persistent feeling of loss of purchasing power among households?
The current real inflation rate is higher than the latest published figures due to the war in Iran and import costs. Fuel prices have been increased in Mauritius, which will have a cascading effect on other products. It is clear that the inflation rate will rise.
However, it should be noted that vegetable prices remained at a reasonable level during the first months of 2026. Generally, vegetable prices in January and February are very high due to the dry season. This situation can be explained by a sufficient production level that met demand. The government has also proposed measures to support prices, which had an impact.
Moreover, the Bank of Mauritius controlled inflation at the beginning of the year. But the situation is now different.
The establishment of a Crisis Committee to study the economic and social repercussions of the conflict in the Middle East was announced on April 1. An inter-ministerial committee meeting took place on April 1, 2026, chaired by the Minister of Energy and Public Services. The Prime Minister chaired a crisis committee meeting on Wednesday, April 8, to review the inter-ministerial committee's recommendations. Do these successive meetings reflect an effective and coordinated response to external shocks?
There have been proposals that have not been implemented. I refer here to the reduction of energy consumption. We talked about "flexitime" and telecommuting, but very few companies are currently doing this. The government is closely monitoring the situation regarding fuel and energy prices. These are volatile products whose prices fluctuate internationally. There is no visibility, making it difficult to forecast and take action. Establishing a crisis committee is a good thing, but it’s crucial to implement the decisions made. The recent agreement signed with India should have been a priority, and we should have ensured its swift implementation. A government-to-government agreement could have provided visibility on fuel prices.
Will the 15% increase in electricity tariffs starting in May, despite some exemptions, further fuel inflation and impact the competitiveness of businesses?
A 15% increase is significant. It will not only affect households but will also increase the overall cost of production. Consequently, the economy will bear the impact, definitely fueling inflation and negatively influencing business competitiveness. This additional burden will work against producing businesses.
The price of common bread rises from 2.60 rupees to 3.90 rupees per 100g. Was it appropriate to raise the price of bread, a staple product, amid purchasing power tensions?
Perhaps the increase could have been smaller. The bakers have been requesting a review of the bread price for several years and issued an ultimatum to the government. If bakers stop producing bread, it becomes a political issue. The government likely has explanations for raising the bread price. International crises have often been used as a pretext for certain government decisions.
Are the recent increases in gas and fuel prices inevitable, or could they have been cushioned differently by the authorities?
Prices increase when there is a disparity between supply and demand. It’s important to examine the structure and price when importing a product, including cost, freight, and insurance. These components have risen.
To answer the question, I believe that if the government wanted to, it could have cushioned these increases. By temporarily revising taxes on these products until the war stabilizes. However, the fiscal situation is delicate in Mauritius. When we talk about lowering prices, we imply that the government should subsidize these products, which requires adequate finances. The Minister of Commerce has indicated that the Price Stabilization Account is in deficit and that the Central Electricity Board’s debt is high. Conversely, if Mauritius' economic situation were healthy, the government would have needed to absorb these shocks.
Should we fear a chain reaction of these increases on all consumer prices in the coming days?
There’s no doubt about it! Energy products are inputs in the production chain. Any increase in input prices will have a cascading effect. We hope the war ends soon. There will be talks between the United States and Iran; let’s wait and see. However, regardless of the decisions made at that level, we will continue to feel the net effect of this war, as anything can happen. If the situation persists, the impact will be felt more strongly with the next shipments arriving in Mauritius.
Given Mauritius' energy dependence, is diversifying suppliers of petroleum products a realistic short-term solution? What are the concrete options?
Diversification is important. A government-to-government agreement provides a degree of predictability and certainty. Mauritius had an agreement with India in the past, and it’s unclear why the previous regime terminated it. We need to look elsewhere now. There are several producers worldwide.
Negotiations occur through tenders and procurement. If it’s a limited tender, it may be necessary to consider expanding it.
Moreover, Mauritius is not utilizing natural resources like sun, wind, or waves. The debate about reducing Mauritius' dependence on fossil fuels is not new. We are far from targeted projections for 2030. This should be an obligation since we import our petroleum and energy products. As the current situation shows, external shocks do not spare Mauritius. We need to increase local energy production through renewable energy to mitigate impacts. This is a national and absolute priority for the government. Mauritius has agreements, for example, with the European Union that contain clear provisions for working with Europe to enhance renewable production. It’s high time to implement these. We could even secure financial support to do so. The government must accelerate this process, as the country's future is at stake.
Fuel prices were low before the war in Iran because there was a surplus in the global market. We tend to become complacent when prices are low, forgetting what we need to do. This war pushes us to act and move towards diversification and the production of renewable energy.
Are the announced measures to secure food supply and stabilize prices sufficient to sustainably protect the most vulnerable households?
Social policy has always existed in Mauritius and must continue. The issue of food security has been around for years. How can a country like Mauritius import onions, potatoes, or garlic from China? China is geographically distant from Mauritius compared to African countries. It has often been suggested to create a chain between Mauritius and Madagascar and other regional countries for food security. There are hundreds of hectares of abandoned land in Mauritius that were previously used for sugar cane cultivation. The government struggles to propose a policy for optimally utilizing these abandoned lands. This is problematic. We hope this crisis serves as a wake-up call. In countries like Singapore, land is used in an economically viable way, which is unfortunately not the case in Mauritius.
As we approach a budget that is projected to be difficult, how far can the government go to preserve purchasing power without worsening the deficit and public debt?
The Prime Minister has retained the Ministry of Finance portfolio, perhaps wishing to review certain economic programs that have always existed, such as the pension system. Certainly, the last pension reform was not ideal, but it was necessary. It was a budgetary measure that had not been taken by several finance ministers before. I believe targeting will be applied in the next budget for social programs. Targeting makes a government unpopular, and no one wants to take that risk. The current regime has done it in some way, but not on a national scale. The eligibility age for the Basic Retirement Pension has been raised to 65. Some retirees do not need it to live. For example, all citizens benefit from subsidies, regardless of their social class. This is not true targeting, as it impacts state expenses.
Our economic situation compels us to thoroughly reassess the country’s economic and social structure. We need to consider how to achieve a sustainable economy in the long term. We have several challenges in Mauritius, starting with the availability of labor. We lack human resources. There will come a time when no one will be interested in joining the police force, which will create a serious security issue in Mauritius. The required qualifications have been lowered. We will then need to import foreigners to serve in our police force.
