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The country’s prime minister, Navin Ramgoolam, must calm unrest and debt while steering the island toward diversification and renewal.
Mauritius has long been recognized for its reputation for stability in socio-economic development. Business-friendly policies and reforms fueled its growth, which mainly came from traditional sectors such as financial services, tourism, sugar, and textiles.
Today, these sectors are floundering, and the island nation of 1.26 million people faces a wave of challenges, creating a sense that it cannot be business as usual.
Inflation, ballooning debt, and global shocks have stirred discontent. A decline in FDI, a 15% tariff imposed by the Trump administration, and a labor shortage driven by an aging population are exacerbating an already challenging situation.
“Mauritius remains on a promising path, but it must rapidly evolve its policy frameworks to cope with rising global and domestic pressures and uncertainties,” says Dr. Dev K (Roshan) Boojihawon, Associate Professor of Strategy and International Business at the University of Birmingham in the UK.
The numbers paint a clear picture of Mauritius’ current state. Economic growth slowed to 4.7% in 2024, from 5% the previous year. The projection for this year is just 3%.
Inflation of 5.2% year-over-year and the depreciation of the local currency, the rupee, are causing agony. Public debt, at about $12 billion and nearly 90% of GDP, is adding trepidation.
Similarly, a 10% decline in FDI to $681 million is projected for 2024 by UNCTAD’s World Investment Report 2025. Greenfield projects took the biggest nosedive, plummeting 66%.
For Prime Minister Navin Ramgoolam, who has been in office for less than a year following a landslide victory, the honeymoon was short.
Although he has been trying to defuse inherited public anger with populist quick fixes, such as reducing the value-added tax on basic goods, fighting corruption, and infusing critical institutions with new blood, discontent is boiling over. A decision to raise the pension age from 60 to 65, for example, sparked protests in June.
To guarantee stability and long-term development, many argue that economic diversification is key.
“Mauritius requires a policy shift toward an economy that is fairer, future-ready, and socially inclusive.”
Nafisah Jeehoo, Bowmans
“Mauritius requires a deliberate policy shift towards an economy that is fairer, future-ready, and socially inclusive,” says Nafiisah Jeehoo, Senior Associate at Bowmans’ Mauritius office.
The government appears to have recognized this, shaping its 2025-26 budget around the themes of economic renewal, fiscal consolidation, and a new social order.
Some of the immediate interventions are intended to support research and development, foster innovation, and create an environment for businesses to flourish. This includes new tax incentives on artificial intelligence, digital assets, and the creative sectors. All of which suggests that Mauritius is daring to dream as it pursues the ultimate goal of private sector-led growth.
Nurturing innovation-driven industries is critical for a swift rebound in FDI. Although the country is land-scarce for large projects, it can still explore new frontiers, such as ocean services, renewable energy, agri-tech, fintech, education/health-tech, and logistics.
In doing so, Mauritius must contend with a shrinking labor force and vulnerability to climate shocks, which raise its risk profile. It also faces competition from countries like Morocco and Rwanda, which are building economies anchored on technological innovations.
These challenges mean Mauritius must get creative to escape the trap of prolonged slow growth.
A vibrant financial hub and sound policies, including trade agreements and double taxation treaties, help safeguard the country’s attractiveness. But building resilience remains fundamental. “Investing in resilience is not just a cost but a strategic move to enhance competitiveness,” says Boojihawon.
A May agreement resolved a longstanding dispute with the UK over the sovereignty of the Chagos Islands, which many see as a masterstroke for Mauritius’ future.
It raised the country’s international profile and boosted investor confidence. If well utilized, it could unleash investments in industries such as maritime, offshore energy, fisheries, subsea cable infrastructure, and scientific research, among others.
