Four Percent Can Stabilise Our Economy, Transformation Requires Six Percent

Faster, broadly shared growth is the bridge between higher living standards, sound public finances and better government

By Ali Mansoor | Former Financial Secretary of the Government of Mauritius, Former Lead Economist at the World Bank and Assistant Director at the International Monetary Fund (IMF)

Mauritius faces a choice. One path consists of reforms that support a rapid and sustained rise in purchasing power while strengthening human capital, productive capacity and the quality of public services. The other is a more limited reform package that can stabilise the economy but delivers a more gradual improvement in quality of life. Growth is not the ultimate objective: it is the means to secure better lives, fairer opportunities and greater resilience.

Put purchasing power at the centre

Growth matters only if it changes daily life. The reform programme therefore measures augmented real earnings: take-home income after tax, together with any earnings credit from the Government, compensation for the cost of living and a fair share of productivity gains, all adjusted for inflation. This is a wider and more honest measure of purchasing power than the wage alone.

A reform programme that delivers four percent growth concentrates scarce fiscal space on stabilisation and a limited set of investments. The six percent path finances a comprehensive programme that delivers sustained increases in purchasing power. By 2036/37, a minimum-wage worker gains about Rs17,400 a month in today’s purchasing power under the six percent path, compared with about Rs8,000 under four percent. The corresponding gain for a median-wage worker is about Rs23,500 rather than Rs9,500. The six percent design deliberately directs proportionately more of the gain towards the bottom while ensuring that work and advancement continue to pay.

 

“Competitiveness does not mean asking least from those with most.”

 

What six percent makes possible

The essential difference between the two paths is the package of reforms that Mauritius can responsibly undertake. Six percent is not a prediction, nor a ceiling. It is the minimum growth rate that our modelling suggests is needed to combine rising purchasing power, stronger public services and a broader welfare state with declining debt.

Where sustainable growth must come from

For a small, import-dependent economy, only export-led growth can be sustained. If higher household income merely increases imports, most of the gain will leak abroad, the external deficit will widen and pressure on the rupee may erode purchasing power. The six percent path therefore requires exports to grow faster than imports, alongside competitive reductions in dependence on imported energy and selected foods. A domestic-demand-led growth strategy, whether four or six percent path would be unsustainable and could ultimately undermine, rather than deliver, social and economic transformation.

“Mauritius should not confuse stabilisation with transformation.”

Higher growth will require Mauritius to extract more value from existing pillars—tourism, financial and business services, manufacturing and the port—while building exportable digital and AI-enabled services, green industries, maritime activities and specialist firms able to serve Africa. Our trade agreements and location are opportunities, not guarantees: firms must turn them into actual sales. This will require better skills, openness to scarce international talent and a credible pipeline of investible projects. Government, operating through transparent institutions protected from political interference in operational decisions, will need to underpin this effort with financing, technical support and diplomatic engagement.

Under the six percent path, a Fair Income Reform increases family welfare by replacing poorly targeted subsidies with transparent income support linked to household income. It would reset the statutory minimum wage at 40 percent of the median wage, helping SMEs, while guaranteeing through a monthly earnings credit that no low-income worker suffers any loss of take-home income when the reform begins. Thereafter, the credit and productivity gains would produce the sustained increase in real purchasing power shown in our projections. Support declines smoothly as earnings rise, so work and advancement always pay. Crucially, the reform includes registered self-employed people, who are too often left outside conventional wage-based protection. They receive the same earnings and cost-of-living credits on the same terms as employees.

Formalisation is rewarded rather than merely demanded. Government contributes the equivalent of the employer share of pension contributions for registered self-employed workers. Their contributory pension is designed to deliver the same pension guarantee as for the employed. This combines social justice with a practical incentive to register with the MRA, contribute and build pension rights.

Pension reform is the costliest part of the programme because it protects the payments of those already receiving a pension while improving the system for everyone. Through the combination of contributory and non-contributory pensions, the reform guarantees at least 50 percent of final pensionable earnings, subject to the agreed minimum and maximum. It also gives additional recognition to qualifying private pensions, so that people who saved voluntarily are not penalised. Such a reform becomes affordable only with a growth rate of 6 percent.

Reforms to the financing of local government and Rodrigues will give communities more resources when they make a credible local revenue effort, while support for infrastructure, digitalisation and service delivery should depend on measurable results. Across government, simpler digital services, disciplined expenditure and parastatal reform should release staff time and resources for better public service.

The other reforms build social cohesion and put Mauritius on a path of rising productivity and exports. They comprise education reform; a National Service programme; and a Transformation Fund that turns ideas into bankable projects and helps young firms and SMEs grow into exporters.

The four percent path retains education reform, National Service and a gradually expanding Transformation Fund, but does not generate sufficient fiscal room for the Fair Income Reform, a broader pension guarantee that recognises contributory and private pension rights, or the larger transfers to local government and Rodrigues. Four percent delivers meaningful stabilisation, but not the transformation Mauritius needs to improve living standards sustainably.

Invest first, reap the dividend later

Once the necessary governance reforms are in place, the transformation programme would deliberately worsen the fiscal position at the outset. Mauritius would be investing in people and productive capacity before receiving the full return. Education reform reduces failure and dropout, but also enriches schooling through sport, arts, civic engagement, digital learning, teamwork and problem-solving. National Service gives young people who need a second chance a bridge into training, work and citizenship. Both must equip Mauritians to work with new technology rather than be displaced by it.

The Transformation Fund is an instrument, not the growth strategy itself. It would finance project preparation and implementation mainly through staged, repayable quasi-equity, concentrating on activities that raise exports, productivity or technology adoption. Independent professional selection, public criteria, milestone monitoring and the discipline to stop failures early are indispensable. As projects become bankable, the Fund should crowd in banks and private investors. Returns from successful investments should replenish the Fund, progressively eliminate its need for annual budget support and ultimately permit repayment of its initial Treasury capital.

Under the six percent path, the deficit peaks in the second reform year and starts narrowing in the third. The budget reaches surplus by 2036/37. Public debt initially rises because investment is front-loaded, but its ratio to GDP subsequently falls to about 64 percent. Under the four percent limited-reform path, debt peaks earlier and lower, then falls to about 66 percent, but only because several transformative reforms are not attempted. Four percent can restore fiscal control; six percent can carry a much larger programme of economic and social investment while producing greater gains in purchasing power. In practice, growth will probably ramp up over two or three years. Productive and governance reforms should begin immediately, while the most expensive recurrent benefits should be phased against verified growth, revenue and delivery milestones so that slower growth does not create a permanent debt trap.

Four percent can stabilise; six percent opens the path to transformation

At four percent growth, Mauritius can stabilise debt, improve real wages gradually and preserve selected investments in human capital and productive capacity. But it cannot safely finance the complete package. At six percent, the reforms become mutually reinforcing. Revenue rises with the larger economy, expenditure discipline creates room for priority services, and debt begins to fall decisively once the early investment phase passes.

Six percent growth is ambitious, but historically credible. Mauritius averaged real GDP growth of about 6.2 percent between 1982 and 1990, with growth approaching 8 percent during 1985–1990. International experience reinforces this precedent. An IMF publication, Africa on the Move: Unlocking the Potential of Small Middle-Income States, edited by Lamin Leigh and Ali Mansoor, finds that successful transitions from middle-income to advanced-economy status were associated with renewed or accelerating growth, rather than acceptance of permanent slowdown. The World Bank’s Growth Commission similarly identified 13 economies that sustained exceptionally high growth for at least 25 years. Six percent should therefore be understood as a demanding minimum benchmark for a comprehensive transformation—not a forecast, a promise or necessarily the limit of Mauritius’s ambition.

Competitive taxation, with a fair contribution at the top

The six percent strategy also supports a more ambitious restructuring of taxation. Mauritius cannot become the business hub linking Africa to the world without a system that is simple, predictable and internationally competitive. The proposed unified personal and corporate rate falls gradually from 15 to 10 percent, while deductions are phased out and the base is broadened. Ten percent is ambitious but recognisably within the range used by successful hubs: the UAE charges 0 percent on the first AED375,000 of taxable profit and 9 percent above it; Ireland applies 12.5 percent to trading income; Cyprus moved to 15 percent in 2026; and Singapore’s headline rate is 17 percent, with exemptions and rebates that can lower the effective burden. Malta’s 35 percent headline rate is misleading on its own because its imputation and refund system can produce much lower effective rates in qualifying cases, while a new optional 15 percent final regime is also available. Large multinational groups must in any event be considered alongside the global 15 percent minimum-tax rules.

Competitiveness does not mean asking least from those with most. A carefully tapered contribution from the top one percent of households would raise about one percent of GDP for transformation, without a cliff at the entry point. Representatives of these households could serve alongside workers, professionals, civil society and other taxpayers on Ministry Advisory Boards that examine transformation plans and service standards. Their participation would neither earmark their contribution nor confer privileged influence: the Boards would broaden expertise and scrutiny, while ministers would retain strategic authority and accountability.

Better government is a prerequisite for reform to deliver

Transformation is not only a matter of transfers and investment funds. Governance is the key binding economic constraint: without competent, accountable delivery, six percent will be out of reach and even four percent is unlikely. 

The full institutional agenda will be addressed in a separate article, but its operating principles belong here: professional appointments; transparent procurement; independent regulation; clear targets; published delivery scorecards; and firm conflict-of-interest rules. Ministry Advisory Boards would form part of each ministry and be chaired by its Chief Executive. The minister would set strategic direction and approve implementation plans and corrective action. The Board would advise how best to achieve those objectives, including on implementation and on corrective measures proposed by civil servants or the Board itself. Civil servants would implement approved plans under the Chief Executive’s direction. Quarterly reports would publish the Board’s principal recommendations, ministerial decisions and reasons where recommendations were not accepted; annual scorecards would assess delivery and corrective action. The same safeguards are especially important for the Transformation Fund: politicians should set its mandate, not choose its investments.

The choice

Four percent growth would be worthwhile. It can stabilise the public finances, support gradual gains in real income and preserve a limited reform programme. But Mauritius should not confuse stabilisation with transformation. Only an export-led six percent path, backed by capable institutions, creates the space to more than double the purchasing-power gain at the bottom, include the self-employed, modernise education, protect retirement, finance productive risk, strengthen local government and improve public services. Progress should be judged not by GDP alone, but also by real household purchasing power, distribution, education, health, service quality and environmental resilience. The early cost is real. So is the later dividend.

Sources and notes

• Mauritius 2026-27 to 2036-37 4% growth limited reform.xlsx and Mauritius 2026-27 to 2036-37 6% growth.xlsx (scenario calculations and analytical projections by the author; these are not official forecasts).
• IMF, Who Can Explain the Mauritian Miracle? (including the 1982–90 growth record): https://www.elibrary.imf.org/view/journals/001/2001/116/article-A001-en.xml
• Lamin Leigh and Ali Mansoor (eds.), Africa on the Move: Unlocking the Potential of Small Middle-Income States, IMF, 2016; overview: https://www.brookings.edu/events/africa-on-the-move-unlocking-the-potential-of-small-middle-income-states/
• World Bank, The Growth Report: Strategies for Sustained Growth and Inclusive Development: https://documents.worldbank.org/en/publication/documents-reports/documentdetail/512991468177861986
• Singapore Inland Revenue Authority, corporate income tax rates: https://www.iras.gov.sg/quick-links/tax-rates/corporate-income-tax-rates
• UAE Federal Tax Authority, Corporate Tax General Guide: https://tax.gov.ae/DataFolder/Files/Guides/CT/CT%20General%20Guide%20-%20EN%20-%2010%2009%202023.pdf
• Irish Revenue, corporation-tax basis of charge and Pillar Two: https://www.revenue.ie/en/companies-and-charities/corporation-tax-for-companies/corporation-tax/basis-of-charge.aspx and https://www.revenue.ie/en/companies-and-charities/pillar-two/what-is/pillar-two-rules.aspx
• Cyprus Government, Annual Progress Report 2026: https://www.gov.cy/media/sites/11/2025/05/CY-APR-2026-Final.pdf
• Malta Tax and Customs Administration, corporate tax and refund system: https://mtca.gov.mt/business-tax/corporate/corporate_tax and https://mtca.gov.mt/docs/default-source/documents/legislative-developments/2026/overview-of-recently-published-legal-notices-july-to-december-2025-memo.pdf