Mauritius National Budget Highlights 2018/2019
It is with much pleasure that the Economic Development Board is providing you with a special edition of its newsletter, which will focus on the main measures of the 2018/19 Budget presented this afternoon by Honourable Pravind Kumar Jugnauth, Prime Minister and Minister of Finance and Economic Development.
The 2018/19 budget, themed Pursuing our Transformative Journey, reiterates the Government’s desire and willingness to devise strategies in order to achieve its objective of graduating to a high-income economy, which revolves around defined priorities, namely, economic prosperity, social harmony and environmental sustainability.
The Budget identifies 7 key areas of action for this transformative journey, namely:
- import substitution industry and revival of export-led production.
- strategic and modern infrastructure
- protection and enhancement of our environment.
- standard and quality of life of the population
- an inclusive and caring society
Indeed, the measures in the budget put the welfare and the quality of life of the population at the forefront of the development agenda and ensure that each and everyone benefits from output growth. For that to happen, it is essential that the appropriate mechanisms and instruments are established, and that timely opportunities are created.
Therefore, the budget first provides several measures to consolidate economic fundamentals and address latent structural issues that have mired the emergence of an economy that is easily adaptable to ever-changing global conditions. Indeed, it is widely recognized that there are infrastructural, administrative, legal and talent gaps that are hindering the optimization of resources. A swift implementation of the measures in the budget can eliminate wastage and inefficiencies, bridge resource gaps and push our production possibility frontier further.
In line with Government`s vision to enhance the talent pool, this budget introduces a series of programmes catering for the youth and their employability. The National Skills Development Programme and the Youth Employment Progamme will be supplemented by a Youth Service Programme, a National Apprenticeship Programme and an SME Employment Scheme. These will contribute in improving the skills of the youth to help them secure quality jobs, while improving productivity, which will ultimately benefit the economy.
The balance of payment, especially the current account balance, has indeed been under the strict scrutiny of the Government in this budget, as a persistent current account deficit has widened by 65% in one year, reaching MUR 30.2 billion in 2017. Over and above the scheme to attract capital inflows from non-citizens, the budget emphasises the need to revert to a policy of industrialisation and import-substitution.
Food represents a significant portion of imports, and due consideration has been given to the agro-industry to address this imbalance. Indeed, Government has put forward certain instruments to reduce our dependency on food imports, ensure food security and reduce food price volatility. Sheltered farming, rainwater harvesting, and measures aimed at promoting micro-gardens signal a new era for our agricultural sector with focus on the application of smart techniques to increase productivity.
In addition, to create a level playing field for local manufacturers who are competing unfairly against imported products, budgetary measures have been introduced to ensure that imported products meet the required norms and standards, with stricter control on imports to avoid dumping. Several incentives pertaining to start-ups, SMEs and women entrepreneurs have also been announced to sustain the local economy. The setting up of three industrial parks namely the High-Tech Park at Côte D’Or, the Logistic Park at Riche Terre and a Pharmaceutical and Life Sciences Park at Rose Belle will also fuel this industrialisation agenda.
The primary and secondary sectors of activity, however, require more than just fiscal or infrastructural incentives to survive. A recurrent problem remains the availability of labour as businesses in these sectors struggle to find the adequate capabilities locally. The work permit application will be streamlined to facilitate the recruitment process of foreign workers.
Innovation features high on the agenda with measures aimed at capturing global opportunities being created in Fintech, Blockchain or Artificial Intelligence. The Mauritius Artificial Intelligence Council and a National Regulatory Sandbox Licence Committee will represent a significant change in the development and regulation of innovative activities. The EDB will also be responsible for a Foreign Manpower Scheme to facilitate the entry of professionals in emerging sectors into Mauritius.
This measure is also in line with the ongoing business facilitation agenda which is being driven by the EDB. Another limb of this plan will be the setting up of a single licensing agency within the institution, which will represent a paradigm shift in the business landscape of Mauritius.
A set of incentives is also being introduced under the Smart City Scheme Regulations for urban regeneration with the aim of revitalising those parts of the city, towns and villages that have remained derelict and undeveloped. The objective is to restore, consolidate and improve the built fabric of our towns and villages.
The financial services sector is furthermore expected to undergo a radical transformation following the announcement of a new harmonised fiscal regime for domestic and Global Business Companies and a specific fiscal regime for banks. The budget also provides for the end of Category 2 Global Business Companies licences as from January 2019, with a grandfathering provision for existing companies. There are furthermore enhanced substance conditions that will need to be met, signaling our intent to position the Mauritius International Financial Centre as a trusted and substance-based jurisdiction. The Freeport sector will also follow suit, with increased compliance to global standards.
This year Government goes one step further, in our quest for opening up the economy, by allowing High Net Worth Individuals to acquire citizenship and passport through a direct contribution to a Mauritius Sovereign Fund.
The EDB will furthermore be involved in the development of outer islands, with their capacity to contribute to national output. A fishing port and internet connectivity in Agalega and a Technology Park in Rodrigues will go a long way in unlocking their development capacities.
The budget underlines the importance of ecological stewardship and environmental responsibility. Significant funds have been allocated with respect to the Cleaning Mauritius Programme and to disaster prevention and recovery. To this end, MUR 2 billion has been earmarked for the National Environment Fund.
Gender mainstreaming also features prominently and augurs well for an inclusive and sustainable economy. Women unemployment remains high, and their integration and participation in the workforce will stimulate the productive capacity of our country. Social measures covering a wide range of sectors, especially education, healthcare, housing and poverty alleviation have been announced.
The EDB’s assessment of the budget is that it is one that banks on fiscal responsibility, with the budget deficit maintained at 3.2% of GDP, while ensuring that the structural deficiencies are firmly addressed. It is furthermore notable that these have not been done at the expense of businesses which are allowed to thrive in this particularly critical conjecture. The EDB commends the budget as one that manages to find the right economic, social and environmental balance to pursue our transformative journey towards a high-income economy.
This newsletter features a summary of the key budget measures. The Economic Development Board wishes you a pleasant read!
Joseph E. Charles Cartier
Download the BOI National Budget Highlights 2018/2019