“Budget Analysis”

From Treading Water to Riding the Wave: Turning Budget 2025/26 into Mauritius’s AI-Ready Growth Springboard

By Rudy Veeramundar 

Founder & Editor-In-Chief of Bizweek

The November 2024 election raised hopes that Mauritius would turn the page on stop-start reforms and grasp the opportunities of the new technological cycle. Yet, the first budget of the new administration, presented for fiscal year 2025/26, reads more like an emergency life-jacket than the surfboard the country needs.

The reason is simple: artificial intelligence is cresting towards the Mauritian economy faster than many voters realise. Independent studies suggest that generative-AI tools could automate as many as 28 000 of the 62 000 jobs currently bundled in our export-oriented service platforms – call-centres, back-office finance, software testing and even translation. That is nearly half the sector and five per cent of the national workforce. Unless the nation outruns that wave by building new, higher-value exports or radically boosting productivity, the social rip-tide will pull growth under.

Faced with this challenge, the 2025/26 Budget chose caution. Growth for the period is pencilled in at 4 per cent and the path to the targeted 75 per cent debt ratio is paved with higher consumption taxes: an excise duty of up to 100 per cent on cars (including hybrids), a halved VAT threshold that drags thousands of micro-enterprises into compliance, and a ‘fair-share’ levy on banks. What the Budget gains in near-term revenue it risks losing in long-term dynamism.

An alternative “Go-for-Growth” package tabled by independent economists shows that the twin goals of faster expansion and debt reduction are not mutually exclusive. It argues for a five-plus-per-cent growth target, financed by a modest recurring tax on high-wealth citizens, a CO₂-indexed feebate on vehicles instead of blanket duties and with luxury cars taxed at a high excise rate, and redeploying six billion rupees from new highways to a national programme that plugs the pipes through which sixty per cent of treated water currently disappears. Add a three-to-five-billion-rupee transition fund to reskill workers threatened by AI, a subsidy for ethical-AI research, a regulatory sandbox, and the issuance of sovereign green and blue bonds, and the debt-to-GDP ratio still falls—only faster, because the denominator grows.

Why, then, did the Government not seize the bolder path? Part of the answer lies in the machinery of policy-making. Six months after the election, several line ministries were still updating strategic audits and had not fashioned detailed, costed proposals. Faced with the statutory deadline, the Treasury stitched together a top-down list of ‘what should happen’ rather than a bottom-up programme of ‘what ministries are ready to execute’.

History warns us about the cost of such ownership gaps. Heritage City, e-Procurement, Coaching Mauritius—each collapsed because implementing agencies never truly bought in. National Audit Office reports routinely catalogue half-spent funds and stalled projects, symptoms of ideas that belong to budgets rather than to the people expected to deliver them.

That disconnect is more than bureaucratic trivia; it is a credit-rating risk. If growth undershoots and promised primary surpluses fail to materialise, Moody’s could downgrade Mauritius. A downgrade would drive up borrowing costs just when the island must borrow to finance digital infrastructure and climate adaptation. It would also lead to further job losses in the financial sector.

The first budget of the new administration reads more like an emergency life-jacket than the surfboard the country needs.

The good news is that the 2025/26 Budget already contains the skeleton of a stronger plan—an AI Institute, an envelope for water infrastructure, and the makings of a climate levy on tourists. The task for the next twelve months is to add muscle and connective tissue before the 2026/27 Budget is drawn up.

That homework is clear:

• Empower each line ministry to translate budget promises into dated milestones, full costings and named project managers.
• Encourage line ministries to lead broad consultations with Civil Society on reforms needed to go for 7 percent growth and to reform the social safety net so it delivers better protection at the same cost.
• Identify international partners in the public and private sector that are able to assist Mauritius in formulating and implementing the appropriate response to save jobs and seize opportunities from the AI revolution.
• Launch a pilot AI transition programme, financed through a one-billion-rupee supplementary estimate, to test wage insurance and micro-credential courses for BPO workers.
• Prepare the first sovereign blue-bond issue to refinance expensive rupee paper and channel concessional funds into lagoon protection and grid upgrades.
• Undertake a national debate on taxing high wealth through property taxation on residences above 30 million rupees to replace the income tax increase on the middle class and coupled with a roll-back of indirect taxes that weigh on small and micro SMEs.
• Swap the car-duty spike for a transparent CO₂ feebate, signalling that green growth is not just a slogan and tax at a high rate with an excise duty on luxury cars.
• Mandate e-invoicing across VAT payers by July 2026 and keep the registration threshold at six million rupees until the system is live.
• Publish a quarterly public score-board tracking growth, debt, project delivery, social outcomes and the outcome of consultations on major reforms.

With these upgrades, the 2026/27 Budget could flip the narrative from belt-tightening to opportunity: a lighter tax burden on households, visibly better public services, and a credible glide-path for debt. Most importantly, it would convert AI from a threat into a lever for higher productivity.

Mauritius has reinvented itself before—from sugar to textiles to finance. Artificial intelligence is the next inflection point. The 2025/26 Budget keeps the economy afloat; our collective responsibility is to turn that flotation device into a springboard. Parliament, ministries and the private sector have a year to prove they can work the levers of a Go-for-Growth strategy before credit-rating clouds gather. If they do, the payoff is clear: more resilient jobs, lower taxes on the middle class, and an island that rides the technological wave rather than treads water beneath it.