Mauritius 2011 budget focuses growth beyond Europe

Mauritius' Finance Minister Pravind Jugnauth unveiled a budget for 2011 on Friday which he said was aimed at rebalancing growth and protecting the island nation from volatility in its key European markets.

In his first budget since reappointment as finance minister this year, Jugnauth said the Indian Ocean island's economy would expand by around 4.1 percent this year, underpinned by positive growth in all sectors, and by 4.2 percent in 2011.

"Now is the time to move from the legacy of a development strategy that is too euro centric," Jugnauth told parliament.

"As the world moves to a new multi-polarity of growth and as major countries in Europe recalibrate their policies it is inevitable and indeed an imperative that we also rebalance our own economy," he said.

Jugnauth, leader of the Militant Socialist Movement, was appointed finance minister in May and pledged to strengthen the welfare state. He previously served as finance minister in another administration five years ago.

The resort island of 1.3 million people draws most of its tourists from Europe and its main exports, sugar and textiles, end up in the west.

Jugnauth said the budget deficit would be below 4.3 percent in the coming year, down from 4.5 percent in 2010.

"If we do not adjust on tax policy and take other measures ... the budget would have shown a deficit of 5.4 percent, taking our debt dangerously close to the unsustainable zone," he said.  

"With the measures I am taking, the budget deficit will be contained to 4.3 percent of GDP (gross domestic product)," he said, without giving specific details.

The government plans to collect revenue equivalent to 21.8 percent of GDP, from 21.2 percent this year. Expenditure is seen at 26.1 percent of GDP from 25.7 percent previously, despite an increase in capital expenditure of 0.7 percent of GDP.

Total revenue will be lower by around 3.8 billion rupees, which he said was due to lower dividends from investments and the decision of the European Union to allocate sugar export quotas only to Least Developed Countries.

The $10 billion economy is budgeting public sector debt to increase to 60.7 percent of GDP against 60 percent of GDP last year.

To counter volatility in the rupee's exchange rate, Jugnauth said Mauritius would create a sovereign wealth fund to be invested in a range of asset classes abroad.

"However, forex stability will not be the sole objective of the fund. It will also seek higher returns on the country's excess foreign currency reserves and other public sector foreign currency holdings while minimising the risks," he said.

Initially, the fund will have a portfolio of $500 million, with $350 million of it coming from the country's foreign currency reserves.

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