Mauritius Unveils Budget 2025 with Focus on Growth Reforms

Steady Growth Forecast Amid Fiscal Reforms 

The Ministry of Finance (MoF), Mauritius forecasts a GDP growth rate of 3.9% in FY25 (FY2024/25) as per the  recent Budget. This projection is more optimistic than the IMF growth projection, which stand at 3% in 2025. In  the medium term (FY26-FY28), the MoF anticipates growth to average at 3.9%. These projections are supported  by a range of economic and structural reforms designed by the government to bolster the country’s resilience. Key  strategies involve diversifying economic sectors, investing in innovation and renewable energy, and enhancing  Mauritius’ standing in areas like AI and fintech, the ocean economy, and tourism. Efforts to increase labour force  participation and promote business facilitation also contribute to this optimistic outlook by the MoF. Despite external  risks including geopolitical tensions, lower economic growth in key markets, and climate change, the government  expects that economic growth will be sustained via targeted reforms, strengthened trade relationships with partners  through free and preferential trade agreements, and increased investment. 

Mauritius Budget 2025-2026 Presented on June 5th, 2025 

After the general elections held in November 2024, the Prime Minister/Minister of Finance, presented the first  Budget under the new mandate. In this Budget, the government faced the choice of either prioritising the delivery  of election promises or focus efforts on much needed fiscal consolidation. The Budget highlights the prioritisation  of the latter effort with the potential of long-term benefits of a stable and resilient economy. 

Fiscal Consolidation in the Focus 

The 2025-2026 Budget outlines a strategic plan in three key areas: economic renewal, a new social order and fiscal  consolidation. As a first measure, they have announced the implementation of a performance-based budgeting  system to ensure prudent spending. This method ties government expenditure to specific, measurable outcomes,  these metrics have nevertheless not been enumerated in the current budget documents. 

Revenue Enhancing Techniques 

Additionally, the government introduced major changes to boost revenue, including tax reforms aimed at creating  a fairer and more efficient tax system. Some of the key changes are highlighted below:

1. Changes in Personal Income Tax (PIT) 

The government streamlined the personal income tax to reduce the band rates from eleven to three.

This means that lower income earners (income less than MUR 500,000) are now exempt from paying taxes  while higher income earners (income above MUR 1,000,000) will now be subject to a higher tax rate.  Previously, individuals earning income higher than MUR 2,390,000 were subject to the 20% tax rate. This  new tax system reduces the burden on lower-income earners and simplifies the tax administration system  in Mauritius.  

2. Introduction of Fair Share Contribution on Corporates 

This measure is being introduced to ensure that companies with annual chargeable income exceeding MUR  24 million contribute an additional percentage of their income (apart from the corporate income tax) to  support national revenue. 

3. VAT Registration Threshold Reduced 

In addition to the above, several other changes are being implemented, particularly in the value-added tax  (VAT) system. While the standard rate remains at 15%, adjustments are being made to certain goods and  services to remove VAT on key food products, aiming to reduce the cost of living. However, a significant  change for businesses is the reduction of the annual VAT threshold from MUR 6 million to MUR 3 million.  This implies that a larger number of vendors will now be subject to VAT thus broadening the tax net. 

4. Excise Duties 

Another major source of revenue for the government will be the re-introduction of excise duties on a variety  of goods, such as on hybrid and electric vehicles, alcoholic beverages, and tobacco products. 

• The rates of excise duty and customs duty on conventional motor-vehicles are being increased to  between 45% and 100%.  
• The rates of excise duty and customs duty on non-plug-in hybrid vehicles will range from 25% to 75%. • The rates of excise duty and customs duty on plug-in hybrid vehicles will range from 15% to 55%. • The rates of excise duty and customs duty on electric vehicles will range from 15% to 25%. • New rates are also applicable to other vehicles, apart from motor vehicles.

These increased rates also have an effect on the VAT collection on vehicles. This measure is expected to  curb the import of vehicles in the country. 

5. First Time Introduction of Capital Gains Tax 

Prior to the 2025-2026 Budget, Mauritius did not impose a broad-based capital gains tax (CGT) on  individuals or corporations. Following the government’s tax reforms, a new Capital Gains Tax has been  introduced on non-citizen property resale. Under this measure, non-citizen residents who acquire residential  property in Mauritius are subject to a 15% CGT upon resale. This action is in line with international tax  standards and seeks to control the real estate market by deterring speculative investments, thus making  property more available to serious buyers and investors. 

6. Other Measures 

• Increasing the gambling licence fees for different categories such as casino, gaming house and horse  racing, amongst others. 
• Introduction of “Alternative Minimum Tax” to companies in specific sectors such as hotels, insurance  companies, companies engaged in financial intermediation activities, real estate activities, and  telecommunication companies. This will exclude global business companies and those firms that are  advantaging from tax holidays. 
• Mauritius will amend its Income Tax Act to impose a Qualified Domestic Minimum Top-Up Tax (QDMTT) on income earned by resident subsidiaries and holding companies of MNEs. 

All these new tax measures are expected to increase total tax revenue from MUR 180.8 billion in FY25 to  MUR 223.1 billion in FY26, which is a 23.4% rise in total tax revenue. 

• PIT is expected to rise by 34.4% to MUR 19.4 billion in FY26. 
• CIT is expected to rise by 31.1% to MUR 39.0 billion in FY26. 
• VAT is expected to rise by 7.2% to MUR 64.2 billion in FY26. 

Expenditure Cutting Techniques 

Furthermore, the government aims to achieve fiscal consolidation through strategies aimed at reducing  expenditure. Two key approaches include review of the “Contribution Sociale Généralisée” (CSG) system and  significant change in the Basic Retirement Pension (BRP) age. 

1. Amendments in Basic Retirement Pension Eligibility Age 

The Basic Retirement Pension (BRP) currently makes up 26% of total expenditure. With the ageing  population growing rapidly compared to the working population, the government considers this a significant  risk to the BRP’s long-term viability. Therefore, the eligibility age for the BRP is being increased  progressively from 60 to 65 years. This will be done in a gradual manner: 

Under this new policy, starting in 2030, only those who turn 65 will be eligible to receive pension benefits. Latest data from Statistics Mauritius show that the number of people within the age group of 60-64 stood at 80,804 as at July 2024. Based on this data if we assume that the current population in the specified age  group is approximately 80,000, by increasing the eligibility age from 60 to 65 for obtaining the BRP, this  will reduce government expenditures by approximately MUR 12.8 million per month. This sums up to MUR  153.6 million annually. Thus, the lower pension outflows will help to reduce budget deficits and ease  pressure on public finances. 

However, to stand by the most vulnerable individuals, the government is establishing two committees to  examine matters related to the Basic Retirement Pension. The first committee will explore potential income  support for individuals aged between 60 and 65 who will become ineligible due to the reformed system and  whose primary or sole source of income is the BRP. This will cover a range of beneficiaries such as  housewives, retirees and workers with low occupational pensions. The second committee will examine  potential support for individuals unable to work due to health-related disabilities. These committees will  see if there is a requirement for individuals to receive certain exceptions. 

2. Amendments in “Contribution Sociale Généralisée” (CSG) 

CSG system has become unsustainable. Since FY24, payouts have exceeded contributions by MUR 3.2  billion. This shortfall has deepened in FY25, reaching MUR 9 billion. Therefore, the government has decided  that the CSG allowances will be renewed for this year but will be gradually phased out over a two-year  period. This does not apply to members of households who are beneficiaries under the Social Register of  Mauritius. The phasing out will be done as follows:

Meanwhile, the Independence Allowance payments which is a single payment of MUR 20,000 given by the  Government of Mauritius to eligible youths who have reached 18 years of age. This scheme which also falls  under the CSG will cease starting July 1, 2025. However, the “Revenue Minimum Garantie” and the equal  change allowance will still be renewed for the next 2 years.

Despite all the above measures, the government’s expenditure on social protection is expected to reduce  moderately by 2.2% to MUR 89.1 billion in FY26. This leads to a fiscal deficit reduction from 9.8% in FY25 to 4.9% of GDP in FY26, and eventually to 1.3% of GDP in FY28 (over a period of 3 years). 

Chagos Deal to Ease Government Debt 

The Agreement on the Chagos was signed on the 22nd of May 2025. This agreement is significant in recovering  Mauritius’s sovereignty rights over the Chagos Archipelago. As per this agreement, Mauritius is expected to receive  annual payments for the lease of Diego Garcia from United Kingdom. This will be done as follows: 

After the thirteenth year, the payments will be indexed for inflation. The agreement also includes a GBP 40 million  Trust Fund to support Chagossians. In addition, government will also set up a Future Fund starting with MUR 3  billion in FY27 to create wealth for future generations. 

The gross general government debt has reached MUR 642 billion in FY25, being 90% of the GDP. In order to  reduce this high debt level, the government will utilize the receipts from the Chagos deal for debt repayment in the  initial three years. This is expected to reduce government debt to 79.9% of GDP in FY28 from 90% of GDP in FY25. 

The government’s efforts towards fiscal consolidation, including addressing the budget deficit, borrowing needs,  and national debt, will help to reduce debt levels within the next three years. These initiatives reflect a strategy  aimed at long-term economic stability and growth. 

April 2025 Sees Rise in Tourist Arrivals 

Following a 5.8% YoY decline in tourist arrivals during the first quarter of 2025, the trend appears to be recovering. In April, tourist arrivals increased by 6% (MoM), reaching a total of 120,157. This brings the cumulative number of  arrivals from January to April 2025 to 446,546. Despite this monthly increase, the cumulative tourist arrivals for  2025 show a 1.2% decline (YoY) compared to the same period in the previous year. This minor decline could reflect  underlying issues in the tourism sector, such as global economic uncertainties (driven by the US tariffs) or increased  competition from other destinations. Nevertheless, the two consecutive monthly growth indicates that focused  marketing strategies and enhanced travel conditions are effectively boosting short-term visitor numbers. 

The 2025-2026 Budget, highlights efforts to consolidate existing sectors and diversify the product range within the  tourism industry. Beyond traditional beach tourism, Mauritius is focusing on developing various segments such as  eco-tourism, adventure and sports tourism, cultural and heritage tourism, creative and festival tourism, and  wellness and medical tourism. This approach seems promising as it aims to attract a broader range of tourists and  reduce dependency on seasonal visitors. 

From a business perspective, the government plans to amend the Tourism Authority Act to extend the validity  period of both the Tourist Accommodation Certificate and the Tourist Enterprise Licence from one year to three  years. This change aims to reduce administrative burdens and improve the ease of doing business. 

In addition, Mauritius will introduce a EUR 3 per night Tourist Fee (starting October 1, 2025) for stays in hotels,  guesthouses, tourist residences, and ‘domaines’. Tourists under 12 years will be exempted. The fee aims to  generate revenue for reinvestment in tourism infrastructure and services, potentially improving the visitor  experience. A benchmark with peers, shows that Maldives imposes a Green Tax of USD 6 per night for resorts and  hotels and USD 3 per night for guesthouses. Similarly, Seychelles imposes a daily tourism environmental  sustainability levy which is SCR 25 (~USD 2) for small tourist accommodations, SCR 75 (~USD 6) for medium-size tourism accommodations and SCR 100 (~USD 7) for large tourism accommodations, yachts and island resorts. 

In April, gross tourism earnings amounted to MUR 8.6 billion, bringing the cumulative total since the beginning of  2025 to MUR 32.2 billion. This represents a YoY increase of 1.2%. Although the growth is modest, it still represents  a steady recovery in the sector since the beginning of the year. 

May Sees another Uptick in Headline Inflation 

In May, headline inflation increased to 4.2% YoY, up from 3.8% in April. This marks the third consecutive month  of rising inflation. The primary driver of this increase continues to be the “food and non-alcoholic beverages”  category, which experienced a 1.4% rise in May compared to April. Core inflation, which excludes volatile items  such as food, administered prices, and energy costs, has experienced a slight moderation to 5.3% in May from  5.4% in April. 

The inflation outlook for 2025 remains on the upside. This is influenced by both global and domestic factors. On  the global front, tariff-induced shocks (imposed by the US) have increased uncertainty and disrupted supply chains This has added inflationary pressures in Mauritius’ main trading partners, including the Euro area, the UK, and the  US. Domestically, the narrowing gap between actual and potential output has reduced excess capacity, thereby  increasing demand for goods and services, which is likely to drive up prices. Additionally, favourable labour market  conditions, such as low unemployment and rising wages, continue to contribute to inflationary pressures. New  measures announced in the budget includes increasing the excise duties on alcoholic drinks, and vehicles by 10%  and for high sugar content products will increase from 6 cents to 12 cents. These are anticipated to contribute to  inflationary pressures. 

Decline in Trade 

In March, the merchandise trade deficit increased to MUR 16.3 billion, up from MUR 14.1 billion in February. This  deterioration was primarily driven by an increase in exports to reach MUR 9.7 billion in March. Meanwhile, imports  sightly decreased to MUR 26.0 billion during the same month. 

In March, Mauritius’ main export destinations included South Africa (12.9% of exports share), Madagascar (11.4%),  United Kingdom (9.9%), United States (8.8%), France (7.8%) and Reunion (5.8%). On the import side, the  countries were U.A.E (13.6% of imports share), China (12.8%), India (8.9%), South Africa (7.0%), Japan (5.4%)  and France (5.0%). 

Mauritius is navigating a challenging trade landscape in 2025, with projections indicating a widening trade deficit. 

In April 2025, the U.S. imposed a 40% reciprocal tariff on Mauritian exports due to a trade imbalance. This was  followed by a 90-day freeze, offering temporary relief, during which Mauritius faced a universal 10% tariff. This  decision jeopardizes key sectors such as textiles, seafood, and agriculture, especially those previously benefiting  from AGOA preferences. Mauritius Budget 2025-2026 indicates that the government will seek a mutually beneficial  trade and investment agreement with the U.S. 

The Budget also emphasizes on updating other the trade policies, other than with the US. This includes enhancing the role of embassies to focus on economic and developmental diplomacy, aiming to create actionable trade and  investment projects through more economic cooperation agreements. For instance, government aims to optimise  the benefits of the recently established strategic partnership framework between Mauritius and the US, especially  after the Chagos deal has been finalized. Besides, they will seek to improve trade and investment relations with EU  member states, which we will monitor closely. 

Steady Growth in Mauritius’ Reserves Strengthens Economic Stability 

In May, gross official international reserves increased by 3.8% MoM, reaching MUR 406.8 billion, equivalent to USD  8.9 billion. Consequently, the import coverage extended to 12.3 months, offering a robust buffer against external  economic shocks and ensuring stability in international trade. 

The Mauritian Rupee (MUR) has shown mixed performance against the USD. The MUR has depreciated by 0.6%  over the past three months (March-May 2025). However, looking at a broader timeframe, the MUR appreciated by  2.2% over the last 6 months (December 2024-May 2025) vis-à-vis the USD. This indicates short-term volatility but  a generally strengthening trend in the medium term. The appreciation is driven by the weakness of the USD, largely  due to trade tensions. In addition, since the beginning of the year, the BoM has intervened with an aggregate  amount of USD 50 million. This has also helped contain excessive volatility in the rupee exchange rate.