Mauritius cuts budget deficit forecast

REUTERS

A lone fisherman manoeuvres his small boat along the East coast of Mauritius near Ile aux Cerfs which has one of the most picturesque and spectacular beaches on the Indian Ocean island.

Mauritius' finance minister cut his 2011 budget deficit forecast to 3.4 percent on Monday from an earlier estimate of 3.8 percent and welcomed improved coordination of fiscal and monetary policy to steer the country through the global downturn.

Finance Minister Xavier Duval, who is four months into the job, also trimmed the growth forecast for 2011 to 4.1 percent from 4.2 percent, matching the central bank's prediction, and said inflation would end the year at 6.5 percent.

“We have been able to create a better coherence between monetary and fiscal policy. I hope this will continue next year,” Duval told a news conference.

Duval said government spending had fallen. He told Reuters in October that a large chunk of the government's spending plan had not been put into action, cutting expenditure and reducing the budget deficit as a percentage of gross domestic product.

The relationship between the Bank of Mauritius and Treasury has at times been fraught since the global financial crisis caused friction between pro-growth fiscal policy makers and a central bank whose priority was to target inflation.

Mauritius' Monetary Policy Committee trimmed its key repo rate by 10 basis points to 5.40 percent on December 5, citing low levels of business and consumer confidence.

Some analysts questioned the wisdom of the cut the following day when data showed the year-on-year rate of inflation rose to 7 percent in November from 6 percent a month earlier.

“The monetary policy committee sent a good signal with the recent rate cut,” Duval said.

The tourism sector will grow 5 percent this year, Duval said, while the textile industry, another key pillar of the roughly $10 billion economy, will expand 8 percent.

Tourism revenues would hit 42 billion rupees ($1.43 billion)up from 39.5 billion rupees last year.

“We believe the traditional sectors will be the main drivers of growth next year,” Duval said, adding that he was maintaining the growth forecast for next year at 4 percent. - Reuters