Mauritius Budget 2025-2026: Charting a course for resilience and inclusivity through Fiscal Consolidation

By Shruti Menon Seeboo

The Mauritian National Budget for 2025-2026, presented yesterday by Dr. the Hon. Navinchandra Ramgoolam, GCSK, FRCP, in his multifaceted role as Prime Minister, Minister of Defence, Home Affairs and External Communications, Minister of Finance, and Minister for Rodrigues and Outer Islands, marks a pivotal moment for the island nation. Titled “Economic Renewal, Social Order, and Fiscal Consolidation,” this budget, the first from the “Alliance for Change” government, is a bold attempt to steer Mauritius from a challenging economic landscape towards a future of sustained growth and equitable prosperity.

The Prime Minister himself set the tone during his address, delivering a scathing indictment of the previous administration’s fiscal practices: “I now turn to the challenging task of fiscal consolidation. The previous Government took fiscal irresponsibility to its zenith. They have placed our country in the quicksand of fiscal and financial distress.” He revealed that for fiscal year 2024-2025, the previous government deliberately inflated revenues, downplayed expenditures, and overstated GDP levels to create a misleading impression of stability. “These were done intentionally to create a misleading impression that all was well – an act that was both reckless and deceitful,” Dr Ramgoolam stated. He further remarked on the audacity of those responsible: “Some of those who have actually dilapidated the public finances – ‘les pyromanes qui se pretendent pompiers’ – have the audacity to unashamedly assert that there is ample money in the Government’s account. ‘Si le ridicule pouvait tuer!'” Instead, he lamented, “all we have uncovered is a mountain of debt and an ocean of liabilities – both direct and contingent.”

The Prime Minister presented stark figures to illustrate the gravity of the situation. The forecasted budget deficit for fiscal year 2024-2025 of Rs 26.8 billion has now surged to an estimated Rs 70 billion, increasing from 3.4 percent to a staggering 9.8 percent of GDP. Public debt, initially forecast at Rs 574 billion, is now estimated at Rs 642 billion, rising from 71.9 percent to a daunting 90 percent of GDP. He also highlighted the deliberate overestimation of recurrent revenue at Rs 207 billion, with the estimated outturn being a mere Rs 181 billion. “We need to reverse this trend,” asserted Dr Ramgoolam. “We are taking the bull by the horns right away in this budget. It will clearly take more than one budget to achieve our goal of fiscal consolidation and reconstruction. Our strategy will focus on investment and growth friendly fiscal consolidation while protecting the vulnerable. We are pacing the reforms with compassion, empathy, and humanity.”

The core of the 2025-2026 budget lies in its ambitious agenda for fiscal consolidation, a necessary step to restore macroeconomic stability. This involves a dual approach: robust revenue generation and stringent expenditure rationalisation, all while safeguarding social cohesion and fostering long-term economic strength. The government has set clear fiscal targets to be achieved by the end of its mandate:

1. A real GDP growth path of 4 to 5 percent.
2. A primary budget surplus.
3. A lower public sector debt of 75 percent of GDP, with a firm commitment to reduce it further to 60 percent in the long term. This obligation, the Prime Minister announced, “will be made statutory in a Fiscal Responsibility legislation.”

These projections, importantly, are inclusive of the anticipated revenue from Chagos, which will be ring-fenced for debt repayment for the first three years. To achieve these ambitious targets, the plan is to adjust both the expenditure and revenue sides of the budget, simultaneously boosting GDP growth through a New Economic Model.

Removing wastage and inefficiencies in our Expenditure System

The Prime Minister underscored the urgency of expenditure rationalisation, stating, “Our strategy is clear – prioritise cuts in inefficiency and wastage.” He directly referenced the Audit Report, describing it as having “unveiled Alibaba’s cave and amplified calls for accountability, responsibility, transparency and efficiency.” He assured the nation, “We have heard these calls many times and we are acting on them.” Government will ensure the Audit Report is debated in the National Assembly and submitted for investigation where appropriate.

A significant initiative is the Public Bodies Financial Sustainability Programme. Bold decisions, including mergers, disinvestment of non-strategic assets, and rationalisation of tariffs, will be considered by parent Ministries. Through these reorganisations, the Government expects to save Rs 5 billion over a three-year period by reducing inefficiencies, cutting waste, and rationalising parastatals.

A particular target of the budget is the Mauritius Investment Corporation (MIC). Prime Minister Ramgoolam did not mince words, calling its establishment by the previous Government “one of the most atrocious decisions… under the pretext of supporting businesses in difficulty. However, it turned out to be a major financial disaster, fraught with fraudulent transactions.” While the Bank of Mauritius is working to put the MIC’s finances in order, the Government is also ensuring greater transparency in public finance management by starting a process to integrate Special Funds into the Consolidated Fund.

Securing long-term stability of our Pension System

Addressing the “mounting fiscal pressures from the pension system” is another critical component of fiscal consolidation. The Prime Minister stated, “It is widely agreed that the CSG introduced by the previous Government is a serious threat to overall fiscal sustainability and social fairness.” He revealed that despite its stated goal to top up elderly pensions, CSG funds were “in fact been used for all kinds of expenditure except what it was intended for… As blatantly acknowledged by the previous Minister of Finance himself, the CSG funds have been depleted. In fact, it would be more appropriate to say dilapidated!” This mismanagement has added some Rs 9 billion to Government debt this fiscal year, an amount projected to surge in future years.

Acknowledging the urgency but balancing it with empathy, Prime Minister Ramgoolam announced the establishment of a Commission of Experts to recommend reforms for the various pillars of the pension system, including revamping the National Pension Fund to replace the CSG. He will personally chair a Steering Committee to assess and act on these recommendations.

Crucially, while the previous Minister of Finance had planned to end several CSG allowances (CSG Income Allowance, CSG Child Allowance, CSG School Allowance, Pregnancy Care Allowance, Maternity Allowance, and Housing Loan Relief Scheme) on 30 June 2025, Prime Minister Ramgoolam, “out of compassion and empathy, and in spite of the challenges of fiscal consolidation,” is proceeding as follows:

1. Guarantees a monthly income of Rs 20,000 for all full-time employees, by maintaining the “Revenu Minimum Garantie” Allowance to top up the difference between actual wages and Rs 20,000.
2. Maintains the Equal Chance Allowance of Rs 2,000 per month for households earning less than Rs 20,000 monthly.
3. Ensures all beneficiaries of SRM will continue to benefit from CSG allowances they are currently drawing. He also reassured beneficiaries that instead of an abrupt cut, these electoral allowances will be phased out gradually until 2027, and that “beneficiaries of CSG allowances earning less than Rs 20,000 monthly will be covered by another scheme under social security and will not be worse off.”

On the Basic Retirement Pension (BRP), which accounts for 26 percent of the recurrent budget, the Prime Minister acknowledged its unsustainability due to a rapidly growing elderly population relative to the working population. To address this “serious threat to the sustainability of the BRP,” the eligibility age for BRP is being increased to 65 years, phased in “over a period of 5 years. It is a very difficult decision, but we believe that we have consciously made the right choice. In our decision we have not prioritised political gain, but we have chosen to do what is best for future generations.” He reassured beneficiaries of the Basic Widows Pension and Basic Invalid Pension that they will continue to receive their pensions until they reach the BRP eligibility age.

Restructuring our revenue system for better performance

The second pillar of fiscal consolidation focuses on restructuring the revenue system. Prime Minister Ramgoolam stated that these new tax policies are not merely about fiscal consolidation, but also “about long-term growth and stability, about long-term economic resilience and social coherence.”

A significant reform concerns vehicle taxation, driven by increasing road congestion and the drain on foreign currency reserves from car imports (expected to be over Rs 20 billion this year). To address these critical issues, effective 6th June 2025, excise duty on hybrid and electric vehicles is being re-introduced, and the rates of excise duty and customs duty on conventional vehicles are being increased to between 45 percent to 100 percent. Furthermore, effective 1st July 2025:

1. A 30 percent increase in the registration duty payable on first registration of vehicles in Mauritius.
2. Abolition of registration duty on the sale and transfer of domestic pre-owned vehicles.
3. An increase in the quantum of the Road Motor Vehicle Licence in the range of Rs 200 – Rs 4,000, depending on the vehicle type.

Reforming the personal and corporate income tax regimes

Regarding personal income tax, the budget simplifies the structure by reducing tax bands from eleven to three. Annual chargeable income up to Rs 500,000 will be taxed at zero percent. The next Rs 500,000 of annual chargeable income will be taxed at 10 percent, with the remaining annual chargeable income subject to a 20 percent rate. The personal income tax reliefs and deductions are also being rationalised to streamline the system.

For corporate income tax, new policies are introduced to ensure fairness and competitiveness. An Alternative Minimum Tax will be imposed on “certain profitable sectors” to ensure equity, given their previously low effective tax rates. Furthermore, a Qualified Domestic Minimum Top-Up Tax will be imposed on resident parent or subsidiary entities of large Multinational Enterprises to raise their effective tax rate to 15 percent, aligning Mauritius with international tax standards while appropriate measures will be introduced to retain the competitiveness of the Mauritius International Financial Services Sector.

Smart Cities and other EDB Schemes

The budget also reviews the Smart City scheme, driven by a policy of land resource repurposing, promoting strategic food security, and ensuring a level playing field. Consequently, the fiscal incentives previously granted to smart city promoters are being discontinued, though a transitional period will cater for projects where construction has already commenced. Regarding property acquisition by non-citizens under EDB schemes or for apartments, the registration duty will increase from 5 percent to 10 percent. Similarly, a transfer tax at the rate of 10 percent (instead of 5 percent) will now be charged to the seller of such residential property or apartment.

Fair-Share Contribution

Embodying a spirit of solidarity, the Government is implementing a fair-share contribution from both corporations and individuals over the next three financial years. Prime Minister Ramgoolam appealed to the more fortunate, “urging them to support the most vulnerable and disadvantaged members of our society.”

Specifically, a high-income earner with an annual net income exceeding Rs 12 million, inclusive of dividend income, will be required to pay a Fair Share Contribution at the rate of 15 percent of their chargeable income (after adding any dividend income from domestic companies). This contribution will be collected under the PAYE system on income received by an individual as from 1 July 2025 and will be applicable for three consecutive income years, up to 30 June 2028. Further contributions on chargeable income apply: 10 percent for individuals earning annual net income between Rs 12 million and Rs 24 million, and 20 percent for those earning above Rs 24 million.

For corporations, a contribution of up to 5 percent of chargeable income is being imposed on domestic enterprises having annual chargeable income above Rs 24 million. Banks will face an additional contribution of 2.5 percent on chargeable income derived from their domestic operations. These fair-share contributions are critical, as the Prime Minister underscored, to “prevent a downgrading of our sovereign rating which could be catastrophic to our economy. It will also ensure social coherence and socioeconomic resilience.” These contributions will be applicable for three financial years only.

Tax Administration

To simplify tax administration while improving revenue collection for fiscal consolidation, the MRA will operate two new schemes for one year only: the Tax Dispute Settlement Scheme and the Voluntary Disclosure Settlement Scheme. These aim to facilitate the resolution of tax disputes and encourage the voluntary disclosure of under-declared or undeclared income, with a comprehensive document on their modalities to be prepared by the MRA. Furthermore, the Tax Arrears Settlement Scheme is being renewed for one year. A notable administrative change is the restriction of the MRA’s powers to raise assessments for past years to only two years, unless exceptional circumstances warrant otherwise, providing greater certainty for taxpayers.

Consolidating Public Finances: Going beyond the numbers

Prime Minister Ramgoolam affirmed that the budget’s ambition transcends mere numbers. “In this Budget, we are doing more than just fiscal consolidation. We are strengthening overall public finances,” he declared. This holistic approach includes a systematic review and reengineering of the portfolio of parastatal bodies, alongside the development of a National Asset Liability Management Framework. This framework, proposed in the Government Programme, aims for a more coherent approach to managing the nation’s financial and physical wealth.

Looking to the future, the Government will begin groundwork to establish a Future Fund, to which receipts from the Chagos deal will be transferred as from year four. The aim of this fund is explicitly “to create wealth for future generations.” Crucially, the Prime Minister pledged, “As a responsible Government, we will safeguard the Future Fund against misuse, having learned from past incidents of fund misappropriation and abuse under the previous government.” To ensure these funds are used for developmental purposes, the Government has identified five main uses:

1. Food Security: To reduce dependence on imports and bolster domestic production.
2. Clean Energy, Climate Change Adaptation and Mitigation: To lower fossil fuel imports and CO2 emissions, while enhancing resilience to unpredictable climatic events and boosting economic growth.
3. The Blue Economy: To harness marine resources responsibly and sustainably, and to reverse the declining trend in manufacturing.
4. Speeding up the adoption of AI, Blockchain technology and innovation.
5. Equity funds for young people and women to become entrepreneurs.

To kickstart these vital initiatives, Prime Minister Ramgoolam announced a seed capital allocation of Rs 3 billion in each financial year 2026-2027 and 2027-2028. As from financial year 2028-2029, the totality of the annual rental and Development Fund will be allocated to these five aforementioned activities. The Prime Minister expressed confidence in the recovery, stating, “As we achieve our recovery goals, which I expect to be in around three years’ time, I pledge that everyone will share in the benefits, including a return to a lighter tax policy.” He concluded this forward-looking section with a resolute warning: “Let me reiterate that unless we take decisive action now to address the damaging legacy left by the previous government, there will be no hope for a brighter future for our youth and for Mauritius. We are confident that our efforts are setting the country on the right course toward full recovery and shared prosperity.”

From Crisis to Care: Rebuilding with empathy and compassion

Before concluding his address, Prime Minister Ramgoolam reiterated a core philosophy guiding his government: “I want to emphasise that advancing our economy and society from crisis to care, from disaster to recovery, we are balancing responsibility with empathy and compassion. We have made a deliberate and conscious policy choice.” He highlighted that despite the urgent need for fiscal consolidation, the government chose not to increase the rate of VAT. Instead, they are removing VAT on a number of food products, giving priority to consumer well-being and aiming to reduce the cost of living.

Further demonstrating this compassionate approach amidst fiscal challenges, the Prime Minister announced several key measures:

1. Income Tax Reliefs: The tax exemption threshold is being raised by 28 percent to Rs 110,000, effectively removing 44,000 individuals from the tax net. Additionally, some 75,000 individuals earning between Rs 500,000 and Rs 1 million annually will pay less income tax. As a direct result of these measures, 81 percent of employees in Mauritius will not pay any income tax.
2. Support for Fishers: Special efforts are being made to increase support to fishers. The budget provides for free first-aid kits to all fishers; navigational aids, mooring aids, and solar lights at all jetties throughout the island; and the construction of three more fish sheds.
3. Increased Retirement Benefit for Fishers: The retirement benefit for fishers who return their fishing licenses is being increased significantly: from Rs 125,000 to Rs 200,000 for artisanal fishers aged 65 years and for net fishers, and from Rs 250,000 to Rs 300,000 for cooperatives.
4. Support for Sugarcane Planters: For the sugarcane crop 2025, planters producing up to 60 tonnes of sugar will obtain a guaranteed revenue of Rs 35,000 per tonne, inclusive of bagasse and molasses.
5. Price Stabilisation Fund: Honouring an electoral manifesto promise, the budget provides for the establishment of a Rs 10 billion Price Stabilisation Fund, with an initial contribution of Rs 2 billion, specifically aimed at lowering the costs of living.
6. Abolition of Registration Duty on Domestic Pre-owned Vehicles: Another electoral promise fulfilled is the abolition of the registration duty applicable on the sale and transfer of domestic pre-owned vehicles.
7. Social Housing Projects: The budget also allocates Rs 67.5 million for implementing ongoing social housing projects for SRM beneficiaries.
8. Free Internet Connection: Provisions are made for free internet connection to families under the SRM.
9. Elderly Care Grant Increase: The daily capitation grant for elderly residents of charitable institutions is being substantially increased from Rs 295 to Rs 500.
10. Drain Infrastructure Investment: Significant allocations are made for critical infrastructure, with Rs 2.4 billion for drain infrastructure projects across the island.
11. Water Sector Investment: Rs 3.1 billion is provided for the water sector, driven by a strong determination “to ensure that every family has uninterrupted access to tap water.”
12. Overseas Medical Treatment for Pensioners: Patients who are beneficiaries of Basic Pensions will continue to receive their pensions when staying abroad for treatment for a period exceeding six months, provided it is recommended by the Medical Board.

In the concluding remarks of his pivotal address, the Prime Minister articulated his government’s core mission: “As we had pledged all along our campaign, my Government’s role is to build a bridge to the future.” He starkly contrasted this with the inherited situation: “This first budget of this Government lays the foundation for building this bridge. A bridge wrecked over the last ten years that has led this country staring right into the abyss.”

He envisioned a new bridge, “built together with the people of this country on solid foundation with solid railings to protect the more vulnerable with a solid platform to withstand the storm and with a clear pathway to a brighter future for the common good of this and future generations.” He acknowledged the immense trust placed in his government by the populace, pledging, “In this journey, the population put the trust in us and we shall honour this trust to get all of us to the right destination.” Confronting the scale of the challenge, Dr. Ramgoolam admitted, “I don’t have a magic wand but I have done my very best in a context where I had to meet different competing objectives.” He then succinctly summarised the budget’s key achievements and strategic directions:

1. Fiscal Consolidation: “we have fiscally consolidated by bringing down the budget deficit, the borrowing requirements and the debt as a percentage of GDP.”
2. Social Protection: “we have protected both the vulnerable group, the lower-middle income group and the middle-income group by maintaining social allowances and lowering their taxes.”
3. Investment and Growth: “we have introduced measures to support investment and growth.”
4. Technological and Climate Transition: “we have embraced measures to deal with the climate transition and the adoption of artificial intelligence and disruptive technologies.”
5. Food Security and Blue Economy: “we have introduced measures to support food security and the blue economy.”
6. Youth and Women Empowerment: “we have adopted policies to support young people and women through an equity fund.”

“Inspired by what Mauritius can become, rather than being locked in the past, Budget 2025-2026 dares to challenge vested interests, disrupt the status quo, take bold decisions and chart a new development path,” the Prime Minister declared. He asserted the government’s resolve to act in the nation’s best interest: “We are leading the way out of the mess not by doing what is easy or popular for Government but what is right for our country.”

The budget, according to Prime Minister Ramgoolam, lays a strong foundation for an “Innovative Mauritius powered by AI and latest technologies,” and “unfolds unprecedented opportunities for private investment and high paying jobs for our youth by fostering four new ‘Pôles de Croissance’.” It boldly reforms the economic model, replacing one that “has long outlived its essence” with a “dynamic and forward looking new economic model.” Furthermore, it reforms the pillars of society “to create a new social order for greater social justice and social coherence,” and “boldly reforms our public finances to reclaim its soundness and resilience.”

Acknowledging the severity of the inherited situation, the Prime Minister used powerful imagery: “Nous sommes devant un paysage en ruine. L’état a fait naufrage.” Yet, he quickly pivoted to hope, affirming, “But we are boldly laying the foundation for economic recovery. It is a Budget that conveys a powerful message of hope and confidence. A brighter future awaits us.” He called for collective responsibility and unity: “We must share the burden now so that we can share the proceeds of growth. Let us be united. And let us commit to build the bridge to the future – As One People, As One Nation.”

He concluded by acknowledging the collaborative effort involved in crafting this budget, thanking his Deputy Prime Minister, ministerial colleagues, the Junior Minister of Finance, the Acting FS, the Chief Economic Adviser, and staff across various ministries and stakeholders. He ended his speech with a poignant quote by the former Secretary General of the UN, Dag Hammarskjöld: “I don’t promise to take you to heaven, but I shall certainly prevent you from going to hell.” This quote encapsulates the government’s immediate and determined focus on preventing further decline while setting the groundwork for a brighter, more sustainable future for Mauritius.