The country’s Prime Minister Navin Ramgoolam must work to calm unrest and debt while steering the island toward diversification and renewal.
Mauritius has long had a reputation for stability in social and economic development. Pro-business policies and reforms have fueled its growth, which has come mainly from traditional sectors such as financial services, tourism, sugar, and textiles.
Today, these sectors are faltering, and the island nation with a population of 1.26 million is facing a wave of challenges, creating a feeling that it cannot continue with business as usual.
Inflation, ballooning debt and global shocks fueled discontent. Declining foreign direct investment, a 15% tariff imposed by the Trump administration, and labor shortages due to an aging population are exacerbating an already difficult situation.
“Mauritius remains on a promising path, but must rapidly develop its policy frameworks to deal with increasing global and domestic pressures and uncertainties,” says Dr Dave K (Roshan) Boogiehaun, Associate Professor of Strategy and International Business at the University of Birmingham in the UK.
The numbers paint a clear picture of the current situation of Mauritius. Economic growth slowed to 4.7% in 2024, from 5% the previous year. The forecast for this year is only 3%.
Inflation at 5.2% year-on-year and the depreciation of the local currency, the rupee, are causing suffering. Public debt, which stands at about $12 billion and represents nearly 90% of GDP, adds to concerns.
Likewise, foreign direct investment is expected to decline by 10% to $681 million in 2024 according to UNCTAD’s World Investment Report 2025. New projects saw the largest decline, falling by 66%.
For Prime Minister Naveen Ramgoolam, who took office less than a year ago after a landslide victory, the honeymoon was short.
Although he has been trying to defuse the inherited popular anger through populist quick solutions, such as reducing the value-added tax on basic goods, fighting corruption, and injecting new blood into important institutions, the discontent is boiling over. For example, a decision to raise the retirement age from 60 to 65 sparked protests in June.
To ensure long-term stability and development, many see economic diversification as essential.
“Mauritius needs a policy shift towards a fairer, future-ready and socially inclusive economy.”
Nafisa JehuBowmans
“Mauritius needs a deliberate policy shift towards a more equitable, future-ready and socially inclusive economy,” says Nafisa Jehu, a senior associate in Bowmans’ Mauritius office.
The government seems to have realized this fact, so it formulated its budget for the period 2025-2026 around the topics of economic renewal, financial control, and a new social order.
Some immediate interventions aim to support research and development, encourage innovation, and create an environment for businesses to flourish. This includes new tax incentives for artificial intelligence, digital assets, and creative sectors. All of this indicates that Mauritius has the audacity to dream as it pursues the ultimate goal of private sector-led growth.
Nurturing innovation-based industries is crucial for a rapid recovery in FDI. Although the country suffers from a scarcity of land for large projects, it is still able to explore new frontiers, such as ocean services, renewable energy, agricultural technology, financial technology, education/health technology, and logistics.
In doing so, Mauritius must contend with a shrinking workforce and exposure to climate shocks, which increases its risk profile. It also faces competition from countries such as Morocco and Rwanda, which are working to build economies based on technological innovations.
These challenges mean that Mauritius must adopt a creative approach to escape the long-standing trap of slow growth.
A vibrant financial center and sound policies, including trade agreements and double taxation treaties, help protect the country’s attractiveness. But building resilience remains key. “Investing in flexibility is not just a cost, it is a strategic move to enhance competitiveness,” says Bougiehaun.
The May agreement resolved a long-standing dispute with the United Kingdom over sovereignty over the Chagos Islands, which many see as a masterstroke for Mauritius’ future.
It has raised the country’s international standing and boosted investor confidence. If well exploited, it can unleash investments in industries such as offshore energy, offshore energy, fisheries, submarine cable infrastructure, and scientific research, among others.
