Mauritius Inflation: A Structural Test of Governance

By Vayu Putra | The State of the Mind | 14 August 2025

On 31 July, Statistics Mauritius released its mid-year inflation update. The 12-month average headline rate had eased to 2.5% in March 2025 from a peak of 7.0% in 2023, suggesting moderation. Yet for many households, the relief is illusory. Food, rent, and utilities are rising far faster than the aggregate index. Electricity tariffs were revised on 1 February 2024, with increases concentrated in higher-consumption domestic bands — for example, one tier rose from Rs 8.77 to Rs 10.46 per kWh, about +19%. Residential sale prices have climbed by roughly 80% since 2019, a pace far outstripping wage growth and pushing affordability beyond reach for many families.

Inflation Dynamics and Policy Baselines

Price pressures in Mauritius are neither new nor entirely imported. Since 2022, the rupee has depreciated by about 7–10% against the US dollar and by a similar margin against the euro. This decline, driven by persistent current-account deficits and import dependence, has raised the local currency cost of everything from fuel to medicines. The CPI basket used by Statistics Mauritius gives lower weight to housing and food than most household budgets, meaning the index can appear stable even as real purchasing power falls.

The official average monthly earnings figure reached about Rs 39,200 in 2023 and Rs 43,500 in 2024. Median earnings are not formally published, but survey evidence suggests that many workers earn well below the average, magnifying the squeeze from essentials.

Governance, Incentives, and Structural Inertia

Mauritius has the technical capacity to address these vulnerabilities. Ministry-commissioned studies indicate that with targeted investment the island could achieve 60% food self-sufficiency and significantly expand renewable energy within a decade. Energy audits have outlined how petroleum imports could be cut by nearly a third through a mix of solar, wind, and biomass.

Yet these measures remain largely unimplemented. Land-allocation policy prioritises high-margin Smart Cities and speculative real-estate projects over domestic agriculture. Subsidies continue to flow to politically connected sectors — sugar estates, property conglomerates, large-scale energy projects — rather than lowering utility bills or financing affordable housing.

Politicians know what a rational, evidence-based programme would require. Food and energy resilience are technically achievable, and self-sufficiency is within reach. But hope and fear are alternated as tools of governance; insecurities are amplified, and citizens are steered toward outcomes already decided. Economic stress is followed by a new crisis — war abroad, disease, market volatility — maintaining a loop in which structural reforms are deferred under the banner of stability.

International and Regional Pressures

The cost-of-living crisis has coincided with a tightening global environment. The IMF projects subdued global growth over the next three years, with elevated interest rates constraining capital flows to small island economies. Currency depreciation has increased the cost of servicing foreign-currency debt, raising fiscal risks.

Regionally, contrasts are instructive. In Seychelles, the regulator reduced electricity tariffs for Q1 2025, cushioning households from fuel-price pass-through. In Mauritius, procurement structures and subsidy design have allowed more of the global cost spike to reach consumers.

Sectoral and Household Impact

Tourism and global business services remain cornerstones of GDP. In 2024, tourism receipts were about 13.5% of GDP, and the global business sector contributed around 8.4%. Rising energy and import costs are eroding margins in both sectors, while offshore operators face pressure to raise salaries to keep pace with living costs.

For households, the compression is immediate. Rent on modest accommodation can absorb 45% of an average wage, with little prospect of relief. The Basic Retirement Pension stands at Rs 15,000–16,000 a month from January 2025, higher for those over 75, but even this is quickly consumed by rent and utilities. Informal credit — payday lenders, pawnshops, family loans — has expanded to bridge gaps, often at interest rates that deepen long-term vulnerability.

Shrinkflation compounds the erosion: smaller bread loaves, lighter bottles of oil, fewer pills per box at unchanged prices. These changes rarely register in official data but are acutely felt in household planning.

Comparative Context

Other jurisdictions offer cautionary parallels. In Barbados, years of rising living costs without structural reform culminated in an IMF-supported debt restructuring in 2018. In Fiji, partial food self-sufficiency has helped blunt imported inflation, though political turnover has slowed wider diversification. Singapore has used state-linked enterprises to stabilise utility prices and maintain housing affordability, albeit within a highly centralised governance framework. Mauritius’s middle-income status limits its access to concessional financing, while its high trade openness leaves it vulnerable to sustained import inflation without eroding real incomes.

Scenario Outlook

Best case: CPI methodology is recalibrated to reflect actual household spending patterns; a medium-term debt ceiling stabilises the rupee; subsidies are redirected toward food and energy self-sufficiency. Inflation moderates to below 5% by 2027, with wage growth tracking the cost of living.

Base case: Current policies continue, with modest relief measures offset by new external shocks. The rupee depreciates a further 20% by 2029. Real wages stagnate and the middle class contracts.

Worst case: Currency instability, fiscal slippage, and external shocks push inflation into double digits by 2026. Household defaults rise, investor confidence weakens, and GDP growth slows by 1–1.5 percentage points over the medium term.

Mauritius’s inflation profile is more than a statistical concern; it is a structural test of governance. The tools to shield households from the worst effects exist and are documented. The decision to use them remains political. For a small, open economy, the cost of delay is measured not only in rupees but in the erosion of trust and the narrowing of future choices. In the end, it is not the monthly bill that will bankrupt Mauritius, but the compounded cost of political inaction.