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The
Economic Freedom
Network

  

Mauritius

Total Government Expenditures

Economic Freedom Rating

As a Percent of GDP
mauritius.gif (5644 bytes)

Part 1: The Economic Freedom Ratings for the Components and Various Area and

Summary Indexes: 1975, 1980, 1985, 1990 and 1995.

(The numbers in parentheses indicate the actual values for the components.)

Components of Economic Freedom

1975

1980

1985

1990

1995

I. Money and Inflation

0.6

2.8

6.0

3.6

9.4

15.7

(a) Annual Money Growth (last 5 yrs.)

1

(32.9)

6

(11.1)

10

(2.8)

2

(18.6)

9

(5.3)

1

(b) Inflation Variablity (last 5 yrs.)

1

(20.1)

3

(8.0)

9

(1.4)

9

(1.3)

9

(1.3)

1

(c) Ownership of Foreign Currency

0

0

0

0

10

1

(d) Maint. of Bank Account Abroad

0

0

0

0

10

1

II. Government Operation

6.5

6.5

7.2

5.9

7.1

34.6

(a) Gov't Consump. (% of Total Consump.)

7

(15.2)

7

(15.7)

7

(14.7)

7

(15.2)

7

(15.8)

1

(b) Government Enterprises

6

6

6

6

6

1

(c) Price Controls

-

-

-

4

4

1

(d) Entry Into Business

-

-

-

-

10.0

1

(e) Legal System

-

-

-

-

7.5

1

(f) Avoidance of Neg. Interest Rates

-

-

10

8

10

1

III. Takings

6.2

4.7

7.0

7.4

7.9

27.2

(a) Transfers and Subsidies (% of GDP)

5

(6.6)

5

(6.5)

6

(5.2)

7

(4.2)

7

(4.4)

1

(b) Marginal Tax Rates (Top Rate)

-

3

(50)

7

(35)

7

(35)

8

(30)

1

(c) Conscription

10

10

10

10

10

1

IV. International Sector

3.1

2.2

3.8

3.9

6.9

22.5

(a) Taxes on International Trade (Avg.)

4

(7.1)

1

(9.6)

1

(9.6)

3

(7.6)

4

(6.3)

1

(b) Black Market Exchange Rates (Prem.)

2

(47)

2

(40)

8

(1)

5

(8)

10

(0)

1

(c) Size of Trade Sector (% of GDP)

5

(56.1)

5

(56.3)

5

(54.5)

7

(71.1)

5

(61.0)

1

(d) Capital Transactions with Foreigners

2

2

2

2

8

1

Economic Freedom Rating

3.9

3.9

6.0

5.5

7.6

Ranking of Country

55

52

15

31

5

 

Part 2: Recent Economic Indicators:

Population 1996:

1.2

Real Per Capita GDP

:

1995=

$9,596

(in millions)

(in 1995 U.S. dollars)

Annual Rate of Change (1985-96):

1.0%

Avg. Growth Rate:

1980-90 =

5.2%

1990-95 =

4.1%

Economic Indicators:*

1988

1989

1990

1991

1992

1993

1994

1995

1996

Change in Real GDP:Aggregate

6.8

4.6

7.2

4.1

6.2

5.4

4.1

4.4

-

: Per Capita

5.8

3.6

6.2

3.1

5.2

4.4

2.1

3.4

-

Inflation Rate (CPI)

9.2

12.7

13.5

7.0

4.6

10.5

7.3

6.0

-

Change in Money Supply: (M1)

15.6

18.1

23.7

19.7

8.0

3.0

19.4

8.0

-

: (M2)

28.7

15.4

21.2

21.9

15.9

17.0

12.3

18.7

-

Investment/GDP Ratio

30.6

30.7

30.4

28.0

29.4

30.8

32.2

25.4

-

Size of Trade Sector (% of GDP)

69.3

70.3

71.1

67.3

64.2

65.4

61.6

61.0

-

Total Gov't Exp./GDP Ratio

22.9

23.2

25.3

23.2

23.2

21.5

22.6

23.2

-

Central Government Budget

Deficit (-) or Surplus (+)

As a Percent of GDP

+0.3

-1.6

-0.5

0.0

-0.8

0.0

-0.3

-1.4

-

Unemployment Rate

10.4

6.7

4.6

3.8

-

-

-

-

-

* The figures in this table are in percent form.

This small island nation has taken substantial steps toward economic freedom since 1980. Surprisingly, our index now ranks it as the 5th freest economy in the world, behind only Hong Kong, Singapore, New Zealand, and the United States. This is certainly a dramatic improvement over its 52nd place ranking in 1980, and 31st in 1990. The figures on government expenditures also suggest increased reliance on markets. As a share of GDP, total government expenditures summed to 23% in 1995, down from 27% in 1980 and 1985.

What accounts for this relatively high ranking? In the 1990s, the growth rate of the money supply has been moderate and the inflation rate relatively stable. The government consumption and transfer sectors are both relatively small and the legal structure provides for protection of property rights and freedom of entry into business. Taxes are moderate. Unlike most other countries, Mauritius rates average or well above average for every component of our index. Its lowest rating in 1995 was a "4" for the price controls component.

The following factors have contributed to the recent jump in rating:

  • A more stable monetary policy (note the rating for each of the two monetary policy components rose from 1 in 1975 to 9 in 1995;
  • The recent deregulations allowing citizens to maintain foreign currency bank accounts;
  • Reductions in marginal tax rates—the top marginal rate was reduced from 50% in 1980 to 35% in 1985 and 30% in 1995;
  • Elimination of exchange rate controls;
  • A modest reduction in tariffs;
  • Removal of restrictions on both the inflow and outflow of capital as well as several regulations that were discriminatory toward foreign capital.

Like its economic freedom rating, Mauritius’s growth rate has been impressive. Per capita GDP expanded at an annual rate of 5.2% during the 1980s and 4.1% thus far during the 1990s. If it continues on its current path, the economic future of this country will be bright.


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