Document of The World Bank Group FOR OFFICIAL USE ONLY Report No. 185050-MU INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL FINANCE CORPORATION MULTILATERAL INVESTMENT GUARANTEE AGENCY COUNTRY PARTNERSHIP FRAMEWORK FOR MAURITIUS FOR THE PERIOD FY24–FY28 September 27, 2023 Southern Africa Country Department 2 Eastern and Southern Africa Region International Finance Corporation Sub-Saharan Africa Department Multilateral Investment Guarantee Agency This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank Group authorization. The date of the last Country Partnership Framework was April 20, 2017 CURRENCY EQUIVALENTS (Currency Unit: Mauritius Rupee (MUR)) (US$1.00 = MUR 45.55 as of August 29, 2023) FISCAL YEAR (FY) July 1 – June 30 ABBREVIATIONS AND ACRONYMS AFD Agence Française de ICT Information and Communication Développement (French Technology Development Agency) IDA International Development ABSA Amalgamated Banks of South Association Africa IFC International Finance Corporation AfDB African Development Bank IPF Investment Project Financing AML/AFT Anti-Money Laundering/ IPPs Independent Power Producers Combating the Financing of M&E Monitoring and Evaluation Terrorism MIC Mauritius Investment Corporation APEI Accelerated Program for Economic MIGA Multilateral Investment Guarantee Integration Agency ASA Advisory Services and Analytics NCDs Noncommunicable Diseases BoM Bank of Mauritius NPL Non-Performing Loan CAT DDO Catastrophe Deferred Drawdown NTB Nontariff Barriers Option PER Public Expenditure Review CCDR Country Climate and Development PET Polyethylene Terephthalate Report PLR Performance Learning Review CEM Country Economic Memorandum PPP Public-Private Partnership CFT Combating the Financing of RAS Reimbursable Advisory Services Terrorism SCD Systematic Country Diagnosis CLR Completion and Learning Review SDGs Sustainable Development Goals COMESA Common Market for Eastern and SME Small and Medium Enterprises Southern Africa STEM Science, Technology, Engineering, COVID-19 Coronavirus Disease 2019 and Mathematics CPF Country Partnership Framework SWIOFish Southwest Indian Ocean Regional CWA Central Water Authority Fisheries/Blue Economy DPO Development Policy Operation Investment Project FATF Financial Action Task Force TA Technical Assistance GDI Graduation discussion income TDB Southern African Trade and GDP Gross Domestic Product Development Bank GRID Green, Resilient, and Inclusive TF Trust Fund Development TVET Technical Vocational Education HIC High-Income Country and Training HLO High Level Outcome UMIC Upper-Middle-Income Country IBRD International Bank for UN United Nations Reconstruction and Development WBG World Bank Group IBRD IFC MIGA Vice President: Victoria Kwakwa Sergio Pimenta Ethiopis Tafara Director: Idah Pswarayi-Riddihough Claudia Conceicao Hiroyuki Hatashima Task Team Leaders: Mario Negre; Asger H. Ram Akers; Marcos Luisa Felino; Persephone Borg Vaena Economou TABLE OF CONTENTS ABBREVIATIONS AND ACRONYMS ............................................................................................................ i TABLE OF CONTENTS ................................................................................................................................ iii List of Tables ............................................................................................................................................. iii List of Figures ........................................................................................................................................... iii List of Boxes.............................................................................................................................................. iii I. INTRODUCTION .................................................................................................................................. 1 II. COUNTRY CONTEXT AND DEVELOPMENT AGENDA .......................................................................... 3 2.1. Social and Political Context .......................................................................................................... 3 2.2. Recent Economic Developments ................................................................................................. 3 2.3. Poverty Profile .............................................................................................................................. 5 2.4. Main Development Challenges .................................................................................................... 7 III. WORLD BANK GROUP PARTNERSHIP FRAMEWORK ......................................................................... 9 3.1. Government Program and Medium-Term Strategy ..................................................................... 9 3.2. Main SCD Recommendations ....................................................................................................... 9 3.3. Key Lessons from the Previous CPF............................................................................................ 10 3.4. Proposed Higher-Level Outcomes and Objectives ..................................................................... 11 3.5. Indicative WBG Program ............................................................................................................ 20 3.6. Implementing the CPF ................................................................................................................ 22 IV. MANAGING RISKS TO THE CPF PROGRAM ...................................................................................... 23 Annex 1: CPF Results Matrix ................................................................................................................... 25 Annex 2: Mauritius (FY17–FY21) Completion and Learning Report ...................................................... 35 Annex 3: World Bank Portfolio in Mauritius .......................................................................................... 57 Annex 4: IFC Portfolio in Mauritius ........................................................................................................ 58 Annex 5: MIGA Portfolio in Mauritius .................................................................................................... 59 List of Tables Table 1. Selected Macroeconomic Indicators and Forecast ............................................................ 5 Table 2. World Bank Indicative Knowledge Program*................................................................ 21 Table 3. World Bank Indicative Lending Program ....................................................................... 21 Table 4. Risks to the Mauritius CPF Program .............................................................................. 24 List of Figures Figure 1. Poverty in Mauritius at US$6.85/Day (%) ...................................................................................... 6 Figure 2. Consumption Growth Incidence Curves by Decile and Period (%) ................................................ 6 Figure 3. Main SCD Recommendations......................................................................................................... 9 Figure 4. Proposed Higher Level Outcomes and CPF Objectives ................................................................ 14 List of Boxes Box 1. Mauritius' Success Story .................................................................................................................... 2 Box 2. Knowledge Platform Opportunity .................................................................................................... 12 FY24–FY28 COUNTRY PARTNERSHIP FRAMEWORK FOR MAURITIUS I. INTRODUCTION 1. This Country Partnership Framework (CPF) sets out the priorities of the World Bank Group (WBG) for supporting the Government of Mauritius’ ambition to achieve and maintain high-income status. The CPF covers the period from FY24 to FY28 and is aligned with Mauritius’ National Vision 2030 and the Government’s five-year program (2020–24), with a particular focus on accelerating growth, diversifying the economy, and generating jobs, increasing the effectiveness of the public sector, and enhancing the country’s resilience. It reflects the WBG’s firm commitment to support countries in reducing poverty, boosting shared prosperity, while responding to global challenges.1 2. Mauritius’ development trajectory provides a remarkable story with important lessons for other countries in the region (Box 1). Since gaining independence, Mauritius has transformed itself from a low- income country with a per capita GDP of US$260 and was dependent on monocrop agriculture into an upper- middle-income country that is an international financial center. Mauritius even reached high-income country status briefly in 2020, which was however reversed by the shock of the COVID-19 pandemic and its devastating impact on the tourism sector. Meanwhile, the economy proved resilient, despite the headwinds generated by global challenges, and with economic recovery underway, the Government has an opportunity to implement structural reforms to boost inclusive growth and reinforce resilience. 3. To make Mauritius’ transition to high-income status irreversible, the WBG will support the economy’s structural transformation, placing a sharp focus on institutional strengthening in a way that also addresses global challenges. The CPF aims to provide flexible and demand-driven support to Mauritius to reach its key development objectives. The CPF program will initially focus on a limited set of key government priorities that can be further complemented and scaled up over the course of the CPF according to emerging demand. It includes a comprehensive knowledge program, underpinned by lending in select areas. Drawing on experiences in Mauritius, the WBG will seek to support the Government in promoting inbound and outbound knowledge exchange for public and private stakeholders in Asian and African countries to enhance economic ties and identify workable development solutions. The Government is willing to cost-share implementation of the CPF work program and has offered to house the World Bank office. 4. The CPF is consistent with the principles for IBRD engagement in countries above the graduation discussion income (GDI) and the WBG’s commitment to supporting small states.2 Mauritius’ GNI per capita of US$10,760 (2022) is above the GDI threshold of US$7,1553 and below the high-income threshold of US$13,205.4 This places the country at the starting point for a Management review of its overall economic status and the non-income factors for graduation in line with the key elements of the IBRD graduation policy.5 1 The CPF is aligned with the findings of the 2022 Systematic Country Diagnostic (SCD) Update and the forthcoming Country Private Sector Diagnostic (CPSD). It is guided by the second Climate Change Action Plan as well as the WBG evolution. It is further informed by the lessons of the Completion and Learning Review (CLR) of the Mauritius CPF (FY17-FY21). The previous CPF was discussed by the Board of Executive Directors on April 20, 2017 (Report No. 112232-MU). The CPF was extended to FY22 by the Performance and Learning Review (PLR) on August 30, 2021 (Report No. 163455- MU). 2 Small states are defined by the Word Bank as countries with a population of 1.5 million or less. 3 Current US$, Atlas method. 4 Per the latest World Bank classification for FY24. 5 The IBRD Graduation Policy emphasizes two key criteria (i) access to external capital markets on reasonable terms, and (ii) progress in establishing key institutions for economic and social development. While WBG financing prioritizes countries below GDI, engagement continues with clients across the income spectrum, as does lending for crisis response to countries above GDI. 1 Box 1. Mauritius' Success Story Over the past 50 years, Mauritius has transitioned from a low-income to an upper-middle-income country—and briefly reached high-income status before the COVID-19 pandemic—escaping the odds imposed by its geographic limitations and the middle-income trap. This evolution represents one of the most remarkable journeys of a poor country in terms of economic development. In the 1960s, Mauritius was a poor monocrop island that faced the constraints imposed by its small island economy, exogenous trade shocks, and natural disasters. By constantly reinventing itself, Mauritius diversified and grew into a robust economy by the 2000s, with globally competitive textile, tourism, information, and financial services sectors. After sustaining a long-term average growth of 4–6 percent during the decades before COVID-19, Mauritius pulled most of its population out of poverty and created a large cosmopolitan middle class. The invariant pattern of Mauritius ’ success relative to its African peers has been due to its: ▪ Shared pro-growth agenda: Mauritius’ policy makers and business leaders across the public and private sectors have been committed to long-term growth, driven by productivity to sustain the country’s competitiveness in world markets, and equitable income growth to preserve domestic social cohesion. ▪ Focus on new sources of growth: Mauritius has been adapting its competitiveness paradigm to emerging sources of growth by shifting structural emphasis and scale from traditional capital inputs toward new forms of capital, such as institutional, human, and networking capital. Today, Mauritius aspires to be a digital economic leader in the region, promoting innovation and value-added from knowledge sectors. ▪ Consistent export strategies and policies: Mauritius’ strategic planning has gradually transitioned from adopting export processing zones to having viable outward-oriented service sectors and attracting foreign direct investments. As its comparative advantage from unskilled, low-cost labor and export preferences to the US and the EU waned, Mauritius moved to use product differentiation, customization for niche markets, and apt response to meet broader consumer preferences by adapting product lines, technology choices, and reorganization of firms. ▪ Political stability and sound governance. Essential to Mauritius’ success throughout its journey have been its stable institutions, which balance the interests of its multiethnic society within the stable, multiparty parliamentary political system. 5. Mauritius has a strong track record of creditworthiness and is in the position to place debt in the highly liquid domestic financial market at low rates. On April 19, 2023, for the first time a Mauritian corporate, Mauritius Commercial Bank (MCB), issued international bond.6 In July 2022, Moody’s downgraded Mauritius’ credit rating to Baa3 from Baa2 while changing the outlook from negative to stable. The latest downgrade was prompted by the Government’s reliance on nontraditional and one-off measures to respond to the adverse economic and fiscal effects of the COVID-19 pandemic. The downgrade, which put Mauritius at the lowest notch of the investment grade scale, could limit the country’s resilience and capacity to absorb future shocks. Nonetheless, despite Mauritius’ recent credit profile setback, it remains an investment-grade economy, with a strong track record of creditworthiness.7 The CPF program will support the evolution toward better external market access conditions, should the Government decide to access them, through strengthening macroeconomic and debt management, as well as financial risk management solutions. The CPF can also support the Government in exploring and accessing the significant international investor demand for green, social, and sustainable bonds. 6 Thebond is with the coupon rate of 7.95 percent in the amount of US$300 million, maturing in 2028. MCB is the largest bank operating in Mauritius. It also operates in 24 other African countries. 7 Most debt is domestic and medium (one to five years) or long term (more than five years). The overall debt composition is favorable with limited exchange rate and rollover risk. 2 II. COUNTRY CONTEXT AND DEVELOPMENT AGENDA 2.1. Social and Political Context 6. Mauritius is one of the most stable democracies in Africa due to its strong institutions, and the current Government is backed by a solid majority in parliament. Mauritius has benefited from sound economic management and democratic continuity with peaceful transitions of power that have been virtually uninterrupted since 1968. In the 2019 elections, the political coalition Alliance Morisien, consisting of two center-left parties, secured a comfortable majority in parliament. The elections gave the incumbent prime minister a second five-year term with a strong political mandate. Women hold cabinet seats and other high-level political positions; however, they are generally underrepresented in politics, and only 20 percent of the members elected to the National Assembly in 2019 were women. The next elections are scheduled to take place in 2024. 7. Mauritius performs well on a range of political and economic indicators relative to many countries in the region. Mauritius retained its first position among 54 African countries on the 2021 Mo Ibrahim Index on African Governance, despite dropping 2.2 points to 74.9 since 2012. Mauritius is also well placed in the Corruption Perceptions Index, ranked 57 of out 180 countries (2022), even though it has dropped nine places since 2012. According to the 2022 Global Corruption Barometer, 61 percent of citizens believe that corruption is increasing.8 The Public Accounts Committee report made public on May 19, 2023, reiterates the need for appropriate legislative changes to sanction misuse or facilitate the misuse of public funds. 8. Mauritius has robust policies and strategies, and the Government has taken steps to improve overall policy and planning coherence, budgeting, and execution. The public sector exhibits degree of sophistication; however, national priority-setting needs a designated coordinating institution, and the Government has set up Maurice Stratégie as responsible body for policy coordination and visioning for the medium to long term. The institutional framework is well-developed and -resourced; however, roles and responsibilities are not always clearly defined. Also, interagency coordination needs strengthening to avoid overlapping responsibilities, institutional fragmentation, and increased transaction costs. While strategies and action plans are often evidence-based, implementation is not systematically tracked because of inadequate monitoring and evaluation (M&E) frameworks. 2.2. Recent Economic Developments 9. Mauritius’s GDP contracted 14.6 percent in 2020 when the COVID-19 pandemic hit the country, which was more than the average rate for high-income and upper-middle-income countries. The economy came to a near standstill as a lockdown was imposed from March to May 2020, with the tourism sector contracting by 66 percent in 2020. To assist the private sector in coping with the effects of the COVID-19 shock, the Government deployed a large state support program, which in combination with lockdown and quarantine measures, was successful in controlling the public health emergency and protecting livelihoods. However, it came at a high fiscal cost. Public debt spiked despite a MUR 55 billion (12.3 percent of GDP) transfer in FY21 to the Government from the Bank of Mauritius, which followed another one in the amount of MUR 18 billion (3.5 percent of GDP) in the FY20 budget from the central bank’s special reserves fund. The central bank’s involvement in fiscal policy, both directly and through the Mauritius Investment Corporation (MIC), has weakened the separation of institutional mandates while increasing contingent liabilities. 8 Transparency International. Global Corruption Barometer Survey. 2022. 3 10. GDP growth rebounded to a relatively modest 3.4 percent in 2021, as the spread of COVID-19 variants hindered the recovery of tourism; however, the tourist sector activity increased substantially in 2022 bringing GDP growth to 8.7 percent. Most economic sectors have returned to pre-pandemic levels. A successful COVID-19 vaccination campaign of 90 percent of the eligible population by end-June 2022 has been crucial to the recovery. Nevertheless, an output gap of around 30 percent remains in the tourist sector. GDP growth is expected to decelerate to 4.7 percent in 2023, negatively affected by the slowdown in the global economy, before converging to its long-term trend over the medium term (Table 1). Sustaining growth as the share of the working-age population declines will prove challenging in the longer term, and a rising dependency ratio will intensify pressure on the social protection system over the coming decades. 11. The fiscal deficit decreased from 19.1 percent of GDP in FY21 to 7.5 percent in FY22, aided by the sale of public shares of Airport Holdings Ltd. to MIC in December 2021, the strong rebound of tax receipts as the economy recovered, and the unwinding of COVID-19 support measures.9 The fiscal deficit is expected to continue narrowing over the medium term under a progressive fiscal consolidation, although the phasing in of the Generalized Social Contribution in FY23 will cause a temporary rise. As a result, the public debt should gradually decline as a share of GDP over the medium term, though it will remain elevated above 75 percent of GDP and vulnerable to a range of shocks, especially the realization of contingent liabilities. 12. The headline inflation rate rose from 2.5 percent in 2020 to 4 percent in 2021 and 10.8 percent in 2022—the highest in over a decade—because of pandemic-related value chain disruptions and the indirect effects of global challenges on international commodity prices. Seeking to control inflation, the central bank hiked the key repo rate five times between March and December 2022 by a cumulative 265 basis points, reaching 4.5 percent. The central bank also introduced a new monetary policy framework with a flexible inflation-targeting regime that became effective on January 16, 2023. This is expected to strengthen the effectiveness of monetary policy by enhancing its transmission mechanism. The new framework includes an inflation target ranging between 2 to 5 percent, with the aim of achieving the mid- point of 3.5 percent over the medium-term. 13. Intense inflationary pressures stemming both from global and domestic sources are expected to persist over the medium term. Inflation will test the Bank of Mauritius’ ability to conduct effective monetary policy, underscoring the importance of safeguarding its independence and enacting strong and credible measures to strengthen fiscal discipline and reduce uncertainty around the country’s future fiscal trajectory. A renewed focus on fiscal sustainability is an urgent priority following two downgrades of Mauritius’ long-term foreign and local currency issuer ratings. An additional downgrade would increase differential spreads for public-sector financing should the Government issue a global bond and could entail significant additional negative consequences for domestic banks and private investment. 14. The current-account deficit narrowed to 12.2 percent of GDP in 2022, despite high prices for oil and food imports, driven by the strong growth of services exports and tourism in particular, and a surplus in the primary income account. Over the medium term, the current account deficit is projected to continue gradually narrowing, assuming the tourism sector will continue to recover, and efforts to strengthen export competitiveness will yield positive results. However, the ongoing depreciation of the Mauritian rupee will negatively affect it by adding to rising import costs, including the cost of productive 9 In December 2021, the Government disposed of its shares in Airports of Mauritius Ltd (valued at MUR 39 billion) to Airport Holdings Ltd. The latter opened its shareholding to the Mauritius Investment Corporation, which invested some MUR 25 billion. As a result of this one-off quasi-fiscal operation, the public debt stock was reduced by 6.7 percent of GDP from its July 2021 level, as the government used part of the proceedings (MUR 13 billion, equivalent to 2.6 percent of FY GDP) to reduce its outstanding liabilities. 4 inputs. Currency depreciation will also negatively affect the sovereign debt profile, especially if combatting inflation requires active monetary policies that deplete reserves and necessitate new short- term external borrowing to prop them up. Nevertheless, the debt profile will remain favorable, as most sovereign debt is denominated in rupees and has medium-to-long maturities. Table 1. Selected Macroeconomic Indicators and Forecast Output, prices and exchange rate 2019 2020 2021 2022e 2023p 2024p 2025p Real GDP growth 2.9 -14.6 3.4 8.7 4.7 4.1 3.6 Inflation (period average) 0.5 2.5 4.0 10.8 9.8 7.0 5.3 Exchange rate (MRU / USD), period avg 35.5 39.3 41.7 44.2 .. .. .. Money and Credit 2019 2020 2021 2022p 2023p 2024p 2025p Broad Money (M3) growth 8.5 16.9 8.8 5.3 6.2 9.6 10.0 Credit to private sector (% of GDP) 78.1 91.9 86.5 80.9 76.0 75.2 75.5 Key repo rate (end of period) 3.35 1.85 1.85 4.5 .. .. .. NPLs (% of total loans, end of period) 4.9 6.2 5.8 .. .. .. .. External Sector 2019 2020 2021 2022p 2023p 2024p 2025p Current account balance (% of GDP) -5.0 -8.8 -13.1 -12.2 -8.4 -6.9 -6.3 Goods trade (net, % of GDP) -21.3 -18.6 -23.5 -28.8 -25.0 -24.4 -24.1 Services trade (net, % of GDP) 6.6 -0.2 -1.6 4.6 5 5.5 5.8 Income (net, % of GDP) 12.5 16.4 20.8 15.4 14.8 15.1 15.1 Transfers (net, % of GDP) -2.8 -6.4 -8.9 -3.4 -3.2 -3.1 -3.1 Gross int. reserves (months of imports) 16.9 14.3 12.7 11.4 10.0 9.7 9.5 Central Government Budget FY2019/20 FY2020/21 FY2021/22 FY2022/23 FY2023/24 FY2024/25 FY2025/26 Revenue and grants (% GDP) 20.3 22.0 26.4 25.4 24.8 24.3 24.2 of which tax revenue 17.9 19.2 22.5 21.9 21.5 21.2 21.1 Current Spending 26.3 30.9 29.2 27.3 27.2 26.2 25.4 Capital spending (budgetary) 1.5 1.7 1.7 1.5 2.0 1.6 1.6 Budget balance -10.5 -19.1 -7.5 -4.0 -5.1 -4.3 -3.5 Overall borrowing requirement 11.7 22.5 6.0 3.4 4.9 4.2 3.6 Public sector debt (% of GDP) 75.6 96.3 97.1 86.2 80.8 78.9 77.7 Sources: World Bank staff calculations/estimates based on official data provided by the authorities. Notes: (1) All percentages are calculated using the calendar year GDP as denominator, including for Central Government Budget variables. Historical debt figures are aligned with Government's latest debt data release on April 28, 2023, however, there are two sources of discrepancy with the official debt to GDP figures: First, unlike official figures, numbers presented do not include the official figures’ consolidation adjustment for Government Securities held by non-financial public sector entities, and second, as mentioned above, due to the use of a calendar year-based denominator. (2) Non-refundable transfers from the Bank of Mauritius are considered financing rather than revenue and have therefore been deducted from the official figures on Budget Balance and the Overall Borrowing requirement. (3) Gross international reserves in months of imports are computed based on the stock of reserves reported in the balance sheet of the central bank at the end of the year, and the value of imports of goods and services in the same year. 2.3. Poverty Profile 15. Mauritius has seen solid progress in reducing poverty, however, the positive trend was rapidly reversed by the economic impacts of the COVID-19 pandemic. Poverty is estimated to have fallen from 19 to 11 percent between 2012 and 2019 (see Figure 1) when measured at the international poverty line.10 The reduction in poverty by 8 percentage points over the 2012–19 period was driven both by economic growth and a decrease in inequality. Growth alone is estimated to have reduced poverty by 4 percentage points, while inequality fell 1 percentage point over the 2012–17 period. However, given the dramatic contraction of GDP in 2020, poverty is projected to have increased from 11 to 16 percent in 2020. With a robust resumption of growth, it is estimated that poverty will return to the pre-COVID-19 level by 2023. About one in two poor in Mauritius are inactive and live off public transfers, while a substantial share of 10 US$6.85/day in 2017 purchasing power parity. 5 the working poor is employed in the informal sector in tourism, manufacturing, and household services. Government measures to address the pandemic predominantly benefited vulnerable households. 16. Rodrigues Island faces particular vulnerabilities with higher poverty incidence and incomes largely below the national average. Approximately 40 percent of the inhabitants on Rodrigues Island live in poverty, with most households being rural, and dependent on subsistence agriculture, livestock-rearing, small-scale fishing, and microenterprises for income and food. Rodrigues Island has little export manufacturing, limited connectivity, and underdeveloped tourism potential. People in Rodrigues earn 30 percent to 50 percent less than the average national income per capita, and unemployment rates are high. 17. Disproportionately low labor market participation among youths and women remains a constraint to more inclusive growth. Over 50,000 young people aged 16 to 24 are neither working nor studying. Additionally, only 43 percent of women actively participate in the labor force, while the average male labor force participation rate is 68 percent. While 57 percent of women with higher education participate in the labor force, only 38 percent of those with a primary school education or less are active. Women were more likely to be displaced from the labor force by the COVID-19 pandemic, and those with lower education levels have faced challenges returning to work. Figure 1. Poverty in Mauritius at US$6.85/Day (%) Figure 2. Consumption Growth Incidence Curves by Decile and Period (%) Note: Dotted line indicates projections. Source: Macro poverty outlook for Mauritius, World Bank, September 2023. Source: World Bank analysis using the Household Budget Survey from 2006/07, 2012, and 2017. 18. Sustained and shared growth contributed to the reduction of inequality in Mauritius in the period leading up to the COVID-19 pandemic. Mauritian households experienced robust consumption growth from 2012 to 2017, with per capita consumption increasing an average of 2 percent annually. Overall, growth was pro-poor, with poorer households’ consumption growing faster than that of richer ones, thus reversing the trend of increasing inequality in previous years (see Figure 2). The shared prosperity indicator for this period reveals that consumption by the bottom 40 percent grew at an annualized growth rate of 2.7 percent, 0.7 percentage points faster than that of the overall population. This finding stands in sharp contrast to that of the preceding survey interval, from 2006 to 2012, in which overall consumption growth was more sluggish. In that period, poorer households grew at a slower pace than the better off, leading to an increase in inequality. The Gini measure of inequality, which rose from 35.7 to 38.5 from 2006 to 2012, fell to 36.8 percent in 2017. The reduction in inequality has been aided by an extensive system of public transfers, which mitigated the increase in wage income inequality. 6 2.4. Main Development Challenges 19. Mauritius’ declining competitiveness started before the pandemic period, despite the adoption of new innovation-oriented policies. Between 2009 and 2019, exports dropped from 48 to 45 percent of GDP. For the same period, Mauritius lost market share in all of its six largest export sectors. This includes tourism, where Mauritius showed solid growth before COVID-19, as well as apparel and business services. Mauritius gained market share in some nontraditional manufacturing activities, including fertilizer, medical devices, and optical glasses, but these increases remain relatively small. Private investment averaged 15 percent of GDP between 2009 and 2019, and except for ICT, there was no comparable uptick in investment in nontraditional sectors. The most recent Global Innovation Index (2022) shows that Mauritius is performing behind its peers on total spending on R&D, quality of research, and tertiary education. The engagement of the private sector in research activities and collaboration between industries and universities on research and development also shows deterioration. 20. Gender gaps persist, and unemployment has been rising as the demand for labor shifts toward service sectors and more skills-intensive activities. Unemployment has increased from below 3 percent in the 1990s to above 6.5 percent over the past decade. Unemployment and low labor market participation are highly concentrated among low-educated youth and women, and the bottom 40 percent of the income distribution is lagging in educational attainment. Furthermore, despite progress in recent years, there are still large gender gaps in labor market participation, at 30 percentage points, perpetuated by social norms.11 Cases of child marriage, adolescent pregnancy, and gender-based violence also persist. Girls have slightly higher levels of education participation and learning outcomes than boys, but only 40–50 percent of women with only primary or secondary education are in the labor force compared with over 80 percent of men in those educational categories. The gender pay gap has been narrowing but is still at 20 percent, with women underrepresented in higher-paying sectors and educational fields (including science, technology, engineering, and mathematics). 21. Mauritius has a rapidly aging population, and while the social protection system is effective, the fiscal cost has increased dramatically over the past decade as some social benefits are not targeted. The size of the population aged 60 and older, currently 16.8 percent of the total population, is expected to reach almost 25 percent by 2030, 30 percent by 2045, and 35 percent by 2058, while the working-age population is expected to continue declining. The social protection system includes both universal and targeted cash transfer programs and accounts for about 27.4 percent of total public spending. While Mauritius’ cash transfer programs are progressive and pro-poor, the basic retirement pension is not targeted at the poor and has regressive effects. By contrast, the Social Aid Program, which is targeted to households that are temporarily unable to earn a livelihood, is pro-poor, with over 85 percent absorbed by households in the bottom 40 percent. As part of the Generalized Social Contribution reform, the contributory pension system for private sector workers was dismantled, which could put further pressure on future Generalized Social Contribution increases as the population ages. 22. While Mauritius has a free and high-quality universal health care system, the aging population, and the growing burden of noncommunicable diseases (NCDs) will be adding pressure to the system. The Government’s current health care strategic plan (2020-24) is broad and could be better focused and prioritized to avoid spreading resources too thin. Total private health spending, largely from out-of-pocket payments, is increasing. Furthermore, increased total spending on NCDs, which accounted for 83 percent of the total disease burden in 2019, is incurred mainly on hospitalization and medication costs. For instance, 11 Women account for only 13 percent of top managers and only 9 percent of majority company owners. Mauritian National Productivity and Competitiveness Council (NPCC) and the World Bank, 2021. 7 Mauritius has limited specialized infrastructure and lacks personnel with the necessary skill levels for cancer treatment. More spending on essential primary health care services would be necessary to prevent NCDs. 23. Mauritius lies within the cyclone basin of the Indian Ocean and is highly vulnerable to natural disasters and climate change. Mauritius experiences direct losses from tropical storms and floods of about 0.8 percent of GDP per year on average. Climate change has already increased the frequency and intensity of cyclones and is likely to raise these risks in the future. While cyclones do not directly hit the main island of Mauritius frequently, the indirect impact is substantial every year. Significant progress has been achieved on vulnerability mapping, but impediments to achieving critical impact-based forecasting remain. Furthermore, gaps in the multi-hazard early-warning system need to be addressed, especially for flooding and flash flood warnings. 24. Mauritius’ infrastructure requires further developments, upgrades, and transition away from fossil fuels. The Government plans to invest MUS 190 billion (about US$4.3 billion) by FY26 in social and economic infrastructure under the Public Sector Investment Plan. A key focus will be on increasing the use of renewable sources of energy for electricity generation to 60 percent and phase out coal by 2030. The percentage of renewables used for electricity generation was 20.1 percent (2020-21). Mauritius’ electricity infrastructure primarily relies on coal and oil and will require significant investments if the country is to meet its greenhouse gas reduction targets. The Government has announced several measures and projects to promote biomass, wind, and solar energy. The Government also identifies smart mobility solutions and data-driven infrastructure for its smart cities goals, as set in Vision 2030. 25. Solid waste management as well as water and sanitation infrastructure need upgrading. Access to water supplies and basic sanitation services continues to be hindered by financial inefficiencies and suboptimal use of scarce water resources. Waste generation per capita in Mauritius has increased drastically over the past decades. The Government is planning a new, ambitious strategy and action plan to promote a circular economy that reduces the volume of waste going to landfill. But even though Mauritius’ public- private partnership (PPP) framework and capacity are adequate, these have yet to translate into more PPP contracts. To promote new sources of financing for sustainable and resilient infrastructure, with support from the World Bank, the Bank of Mauritius in June 2021 issued the “Guide for the Issue of Sustainable Bonds in Mauritius” for sustainable bond issuing on the Stock Exchange of Mauritius. 26. A particular development challenge pertains to Rodrigues Island, which is substantially poorer than the main island. The island of Rodrigues is especially vulnerable to natural disasters and climate change and has experienced significant storm impact over the past years. The role of tourism in Mauritius’s transformation continues to be central, particularly for the development of the lagging regions. The transformation of Mauritius’ economy from agriculture to export-led growth was mostly due to the tourist sector and its huge impact on poverty reduction, increased female participation in the labor force, and investments in human capital. Therefore, the development of lagging regions such as Rodrigues Island is central to the priorities in Vision 2030. In that regard, the development of the Plaine Corail Airport will be critical for improving Rodrigues Island’s connectivity, increasing tourism, and developing the island’s economy. The program will create short-term employment through the construction program and indirectly in the long term through additional jobs in the aviation and tourism sectors. 8 III. WORLD BANK GROUP PARTNERSHIP FRAMEWORK 3.1. Government Program and Medium-Term Strategy 27. Mauritius’ Vision 2030 “Transforming Our Future for the Better” and the Government’s Program (2020–2024) outline key development priorities for achieving high-income country status. The CPF is aligned with Mauritius’ strategic development priorities and aspirations to become a high-income economy. Vision 2030 prioritizes addressing unemployment, eradicating poverty, further opening the economy, and encouraging innovation. To achieve the vision, the Government Program (2020–2024) sets out short-term priorities for developing Mauritius into a modern, vibrant, and advanced economy by focusing on innovation and entrepreneurship that is underpinned by industrial and trade policies and robust macroeconomic fundamentals. Combating poverty and improving the standard of living of the population are key Government priorities, and the program emphasizes the importance of fair access to prosperity and equitable wealth distribution. The Government Program also sets out clear ambitions for climate-resilient infrastructure, especially for water provision, and the use of clean and renewable energy. The program further identifies more coherent medium-term economic planning as a priority alongside consolidated regulatory frameworks for financial and banking services. Mauritius is in the process of preparing a new country development strategy. 3.2. Main SCD Recommendations 28. To successfully recover from the COVID-19 crisis Figure 3. Main SCD Recommendations and the spillover impacts of global challenges, a new generation of reforms will be necessary to boost Industrial policy competitiveness and increase the productivity of capital •Shift government support from mature and labor. Key priorities should involve addressing industries to higher value-added ones. structural challenges that have emerged in recent years Social protection and predate the COVID-19 pandemic, including a •Increase efficiency and promote labor-entry and consumption-driven growth model with a declining share pro-poor-targeted support. of private investment and stagnating capital productivity; a Education and skills sustained loss in export competitiveness, reflected in the •Raise the quality and availability of skills and declining market of share of traditional exports; an aging boost the quality of education outcomes. population and increasing friction in the labor market; skills Competitiveness shortages and exclusion of low-educated women and youth •Improve labor market institutions, eliminate gender gaps, and keep up with demographic from economic opportunities. changes. Public sector 29. For Mauritius to make progress on the twin •Raise public sector efficiency and enhance goals, the SCD Update highlights several opportunities evidence-based policy formulation. for high-impact reforms (figure 3), most of which will be Resilience supported by the CPF. The SCD Update underscores the •Strengthen policies and institutions to respond need for revisiting industrial policy through the to natural hazards and climate change. reallocation of resources from state support to mature industries toward a paradigm that is private sector driven, innovation focused, and digitally enabled. Furthermore, raising the efficiency of social protection and promoting labor-entry would have a direct positive effect on the poor through better and more targeted support, while also contributing to fiscal sustainability. Prioritizing the quality and availability of skills while reducing inequity in outcomes is crucial to supporting inclusive growth. This would be further supported by improving labor market institutions and eliminating gender gaps. Similarly, improving resilience against natural hazards and climate change 9 would have direct benefits in terms of protecting the livelihoods of the poor and the bottom 40 percent of the population. Lastly, better ingraining of evidence-based policies to raise public sector efficiency would yield strong development benefits and strengthen delivery. Given the lack of current demand, pension reform is the only SCD priority that will not be supported by CPF program activities in the near term. The World Bank is ready to resume the dialogue and engage if demand emerges.12 3.3. Key Lessons from the Previous CPF 30. The design and implementation of the previous CPF (FY17-FY21) offers important lessons for the WBG engagement in Mauritius—notably the need for providing tailored support and specialized knowledge.13 The previous CPF aligned the WBG program objectives and interventions with the Government’s priorities, with the goal of accelerating inclusive growth in Mauritius. The WBG delivered a robust portfolio of 12 Advisory Services and Analytics (ASAs), supported by eight Reimbursable Advisory Services (RAS) agreements. The experience demonstrates that the WBG engagement should be tailored around specific needs, balancing analysis with a sharp focus on actions that are prioritized, costed, and implementable. The key lessons of the Completion and Learning Review (CLR) are the following:14 (a) The WBG program design needs to be demand driven and include a high degree of flexibility to respond to emerging priorities and changing circumstances. While a flexible design has proven to be a good approach in an aspiring high-income country like Mauritius, the design still needs to be grounded in coherent higher-level priorities to ensure a strategic line of sight for the medium term. The CPF implementation needs to be regularly validated with the Government during the CPF period to assess progress, identify and address bottlenecks, enhance outcome-orientation, and develop new programs. (b) With the growing importance of RAS, the WBG’s effectiveness depends on clearly defining the scope of work, value additions, and deliverables up front with the Government. Expectations about the scope of work, the eventual ASA and RAS achievements, as well as key deliverables should be discussed and agreed on at the concept stage. The Government and stakeholders should be closely involved during the development stage to ensure alignment with outcomes. Key issues need to be addressed up front, including political economy considerations; feasibility; sustainability of outcomes, objectives, and targets; funding modality; and dissemination of results. (c) ASA and RAS are effective instruments, especially when focused on implementation support to specific reform efforts. Realism during the design phase, as well as robust consultations with stakeholders and sustained communications, are key. In addition, attention should be paid to the implementation modalities, including agreeing on dissemination methods using a variety of policy notes and other knowledge products. (d) WBG knowledge is widely recognized for filling in knowledge gaps, supporting advocacy, and providing high-quality core diagnostic services. ASAs need to focus on bringing out key messages to support public debates and inform decision-making. Working with local counterparts to co-author reports can add significant value. Consultations and dissemination of information should be 12 In the previous CPF, pension reform was identified as a separate CPF objective. The World Bank provided technical assistance to the Government in considering different pension reform options. The PLR dropped the objective, as the engagement had stalled, and implementation had been off track (see para 38 of the CLR in Annex 2, for more details). 13 The lessons were derived from the results of the WBG program, consultations with the Government and stakeholders, and interviews with WGB staff. 14 See section “V” of Annex 2. 10 strategically planned and implemented with the Government. The most successful interventions include well-defined phases of public engagement and outreach. (e) Close WBG coordination is critical for improving the policy dialogue and opening new entry points for WBG engagement in support of job creation and green development, as well as for developing regional value chains and improving trade integration. MIGA can help to promote foreign direct investment and international commercial lending in the country through its political risk insurance products and credit enhancement instruments covering the risk of non-honoring of financial obligations of sovereign, sub-sovereign, and state-owned enterprises. (f) Continue adapting IFC’s engagement strategy in countries such as Mauritius—both its investment instruments and advisory services—is important to further support new market opportunities and mobilize other financiers. This includes building on its analytical work in collaboration with the World Bank (such as through the Country Private Sector Diagnostics) and identifying specific policy reforms for diversifying and enhancing the competitiveness of the Mauritian economy in the regional context of Africa and Asia. 3.4. Proposed Higher-Level Outcomes and Objectives 31. The overarching goal of the CPF is to continue supporting Mauritius’ transformation toward an innovative, inclusive, and resilient high-income economy. The CPF will assist Mauritius with addressing its national development priorities, with a focus on the most pressing constraints to poverty reduction and shared prosperity. Decisions on selectivity in the CPF were informed by: (i) the recommendations of the SCD and the Country Private Sector Diagnostics (CPSD); (ii) the findings of the CLR; (iii) extensive consultations with government and external stakeholders; and (iv) the WBG’s comparative advantage and ability to deliver tailored support through in-house expertise augmented by external consultancies.15 32. The multiplicity of crises and the high degree of uncertainty resulting from complex global challenges necessitate a differentiated country-strategy response. The CPF reflects WBG’s firm commitment to support countries in reducing poverty, boosting shared prosperity, while responding to global challenges.16 This WBG framework is relevant to Mauritius for protecting and improving long-term country development outcomes: responding to food security crises, protecting jobs, strengthening resilience to multiples crises. Furthermore, Mauritius will be benefiting from the WBG’s growing support for small states17 to address its specific challenges by (i) facilitating access to public and private finance, (ii) strengthening institutions, and (iii) building resilience to climate change and natural disasters. 15 The program prioritization and results logic benefited from several rounds of in-country consultations, some of which were conducted jointly with IFC. The consultations involved a wide range of stakeholders, including individuals from the private sector, representatives of the line ministries and the civil service, civil society, academia, and donors sharing views about Mauritius’ development challenges and how the WBG can address them in the most effective manner. An action matrix was prepared consolidating all sectoral proposals, drawn around priorities identified in a letter from the Minister of Finance, Economic Planning and Development dated June 3, 2022. 16 Navigating Multiple Crises, Staying the Course of Long-Term Development: The World Bank Group Response to the Crises Affecting Developing Countries, The World Bank, July 2022. The framework consolidates the WBG corporate frameworks from the COVID-19 crisis response, the response to climate change crisis (GRID approach), with the response to the impact of other adverse global crises, which together have stretched the fiscal space and debt to unique and complex crisis levels. 17 IBRD resources available to small states can be doubled, subject to prudential limits, and are exempt from proposed maturity premium increase. 11 33. The Government has expressed a strong demand for WBG support in several areas and a range of activities, from just-in-time advisory services, knowledge support, technical assistance, and investment financing. The key areas of Government demand include competitiveness, jobs, economic diversification, and higher value-added activities such as the blue economy, pharmaceuticals, biotech, tourism, financial services, education, as well as potable water and wastewater management. Consultations have further highlighted the demand for support in increasing the effectiveness of public sector management and service delivery, especially for water, renewable energy, and solid waste management, as well as crisis preparedness and disaster risk financing. The Government has also expressed an interest in WBG support for the economic development and connectivity of Rodrigues Island, through financial assistance for the extension of the runway at Plaine Corail Airport. Reform of the basic retirement pension, although identified in the SCD as a high-impact area, will best be addressed within a broader reform agenda agreed with the Government. 34. Mauritius seeks to learn from its peers and is ready to share its own experience with other countries, and the Government has requested WBG assistance in establishing a knowledge-sharing platform to operationalize Mauritius’ development expertise (Box 2). Mauritius’ successful development trajectory can serve as valuable lessons for aspiring middle-income countries. The CPF aims to shift the WBG partnership with Mauritius from focusing on the facilitation of in-bound knowledge to also including out- bound knowledge to share development experiences with other countries. Underpinned by the knowledge program supported by the CPF, the establishment of a knowledge platform will help Mauritius create new growth niches to support its transition toward high-income status, while also helping lower-income countries in the region to benefit from Mauritius’ rich and successful past. A number of the priority areas for which the Government is seeking WBG support could potentially be delivered through the knowledge platform to further enhance program coherence and support the CPF objectives. Box 2. Knowledge Platform Opportunity Mauritius’ development trajectory offers important lessons for other countries in the region and beyond. The Government has requested that the WBG support it in exploring the opportunity for launching a knowledge platform in Mauritius. The platform would be established around specified thematic focus areas to generate and exchange solutions to policy challenges in Mauritius and the Africa region. Drawing on the experience from other countries and centers, such as Malaysia, the Republic of Korea, Singapore, and Dubai, Mauritius may explore the value proposition to serve as a knowledge exchange platform (inbound and outbound) for Asian and African policymakers, private sector representatives, and development stakeholders to share experiences, ideas, and lessons on how to enhance economic ties between regions—and how to promote economic recovery and development progress in the post-crisis period. Specifically, Mauritius’ pursuit can be motivated by flows of: ▪ Inbound knowledge from the Asia Region, given the complementarity of Mauritius and East Asia and the Pacific countries' trajectories and High-Income Country aspirations, carries significant appeal for policymakers and private sector actors. East Asian and the Pacific economies have been the fastest to rebound from the global pandemic. ▪ Outbound knowledge to African countries which have traditionally experienced slower rates of economic growth and grappled with persistent challenges, yet many states on the continent are now modernizing at a faster pace and undergoing economic transformation with growing middle class. Mauritius’ success story, experiences, and capabilities will accordingly be relevant to many countries in the region that aspire accelerated growth and transformation. In Malaysia, the WBG and the Government established a knowledge hub, hosting over 50 exchanges and learning activities from over 40 IDA countries in just two years. Mauritius can replicate this experience to meet increasing demand across Africa for tourism, climate knowledge, compliance with anti-money laundering, financial sector security, and cybersecurity. On the inbound side, the hub could bring home experiences on green tourism, fintech development, climate finance, and learning from the education hubs in Singapore and Dubai. 12 35. IFC will support prioritization and increasing investments for innovation to help Mauritius transition into a more knowledge-driven economy. The consultations on the CPSD and the CPF highlighted the growing importance of adopting a regional integration focus for private sector-led engagement and supporting Mauritius’ agenda to attract more African businesses to Mauritius, owing to its relatively conducive business environment. This will involve exporting Mauritian business champions and their know- how to the rest of the African continent, especially in the textile, agribusiness, health care, and financial sectors. More specifically, IFC will continue to leverage its investment and advisory capabilities, including its upstream and policy reform work through its “Creating Markets Advisory” (CMA) efforts, and applying relevant platforms products in key priority sectors such as renewable energy, tourism, agribusiness (both regional and global value chains), green finance, the blue economy, while facilitating South-South investments as part of its efforts to support greater regional integration in Africa. MIGA will seek to complement engagements in these sectors through its guarantees. In addition, IFC will continue to work closely with the World Bank to support greater economic diversification through deeper engagement in knowledge-based and innovation-led sectors, such as in the digital economy, private higher education, and health services, identified by the CPSD. 36. MIGA will continue to support Mauritius’ financial sector to provide needed credit to small and medium enterprises (SMEs) and other corporates, as well as promote regional trade finance activities and transactions to mainland Africa. MIGA issued a capital optimization guarantee to Absa Group of South Africa (ABSA) covering the risk of expropriation of the mandatory reserves held by ABSA’s subsidiary in Mauritius, Barclays Bank Mauritius Limited at the Central Bank of Mauritius. The guarantee will enable the deployment of the additional lending headroom to SMEs, corporates and project finance clients. A MIGA guarantee covering loans to the Eastern and Southern African Trade and Development Bank (TDB) issued under the Agency’s COVID-19 response supports the growth and diversification of TDB’s trade finance portfolio throughout the Common Market for Eastern and Southern Africa, including Mauritius. MIGA will continue to seek to identify other opportunities to mobilize cross-border investments and lending through its political risk insurance instruments working together with the Bank and IFC. Mauritius is also one of the countries in Sub-Saharan Africa that may benefit from MIGA’s credit enhancement products, covering the risk of not honoring financial obligations of the sovereign, sub-sovereigns, and state-owned enterprises, which would enable MIGA to support high-priority public sector projects consistent with the CPF. MIGA will also continue to support investments from Mauritius, which serves as a conduit for investments into sub-Saharan Africa (SSA) and a regional investment hub. The Agency’s gross outstanding exposure from Mauritius registered US$863.6 million as of end-FY23, with investments in diverse sectors (agribusiness, manufacturing, tourism, infrastructure, energy) overwhelmingly destined for various countries in SSA, helping to promote regional integration. 37. The CPF will anchor the WBG program around two long-term higher-level outcomes (HLOs), buttressed by six objectives, three of which will be cross-cutting in support of institutional strengthening. The HLOs are aligned with Mauritius’ development priorities and will require progress in several key sectors.18 The previous CPF laid out three main areas of engagement: increasing competitiveness; fostering inclusion; and bolstering resilience and sustainability. While these areas remain highly relevant, in identifying the new HLOs due consideration has been given to deepening areas of existing engagement, development of the near-term pipeline, alignment with the WBG’s longer-term corporate priorities under the 2030 Agenda for Sustainable Development, and contribution to addressing global challenges. Across the 18 SeeAnnex 1 for a more detailed discussion of the HLOs and CPF objectives. The HLOs are pitched at a higher level of country outcomes, focusing on the WBG contribution to the sustained improvement in the well-being of the poorest and most vulnerable people in Mauritius. Achieving the HLOs is expected to involve the combined effort of the Government, the WBG, and other development partners over several CPF cycles. 13 objectives, WBG will focus on supporting interventions for strengthening policies and institutions relying primarily on advisory and analytical services and instruments, augmented by lending based on demand. The CPF will be mainstreaming gender equality, especially across human development activities. The Government is currently revising the national gender policy framework and has requested WBG support with experts, linking to international experience and best practices. Figure 4. Proposed Higher Level Outcomes and CPF Objectives HLO1: HLO2: Improved job creation Enhanced resilience to shocks Objective 2: Objective 4: Improving Objective 1: Supporting skills regulatory quality Enhancing development and for better and competitiveness quality of greener public education services Objective 5: Objective 6: Objective 3: Building Strengthening Supporting resilience to public finance financial sector climate-related management development events and planning HLO1: Improved Job Creation 38. The Government is committed to accelerating job creation by adapting its industrial and trade policies. HLO1 centers on improving job creation and continues the effort of focus area 1 from the previous CPF with an added emphasis on strengthening the human capital base and addressing gender disparities. Building on the progress of the previous CPF, the WBG will seek to further improve inclusive growth by investing in regions with significant development potential, such as Rodrigues Island, but also by supporting competitiveness and economic diversification, and knowledge-intensive activities while increasing employment in higher value-added sectors. This will involve emphasis on improving employability by strengthening educational outcomes (including educational attainment and learning), especially for girls, and ensuring that the skills of the labor force match the needs of the private sector. The WBG support on financial sector stability and transparency will remain a key area of focus. Objective 1: Enhancing competitiveness 39. As Mauritius is outgrowing its comparative advantage in labor-intensive traditional activities, a new innovation-oriented policy is needed to boost the expansion of competitive new industries and technological upgrading of existing ones. In line with the SCD Update’s call for revisiting the country’s industrial policy, the WBG will work with the Government to strengthen Mauritius' competitiveness by supporting the second-generation reforms that will promote a new growth model based on innovation 14 and productivity growth. This assistance will help to identify and develop new areas of comparative advantage by (i) supporting post-COVID-19 recovery of the tourism sector, with a focus on connectivity, diversification of markets, and environmentally sustainable development; (ii) supporting the growth of new, higher-value, knowledge-intensive and digital sectors by evaluating existing innovation-related government programs and exploring new regional opportunities and roles (see Box 2); (iii) strengthening the institutional framework in support of foreign direct investment in strategic sectors to promote structural transformation; and (iv) leveraging IFC investment, advisory and upstream capabilities, as well as MIGA guarantees, to further support and catalyze new projects especially in green finance, renewable energy, education, and health care (including emerging opportunities in biotechnology). 40. Taking a demand-driven approach, the WBG will support key sectors for diversification and employment generation, including the blue economy, and tourism. Mauritius is facing growing water scarcity, increasing storm surges, environmental degradation, and coastal erosion, which all pose growing threats to the tourism sector. The future growth of the Mauritian economy will depend on diversifying tourism product offerings to include heritage and nature-based tourism, and the development of the under-utilized exclusive economic zone, which is 1,000 times as large as its land area. Investing in the blue economy will help to ensure that growth from the tourism and fishing industries is fully climate resilient, and terrestrial ecosystems are protected and restored. Other areas with potential for engagement include marine spatial planning, adaptation of oceanic sectors, big data and maritime digitalization, and policy reforms for fisheries sustainability and private sector investment. The Bank will also support the development of Mauritius’ 10-Year tourism strategy blueprint, prioritizing blue tourism and sustainability considerations, focusing primarily on land use, spatial planning, and investment needs. 41. A key focus for the WBG will be to address constraints and harness opportunities for private sector development in selected sectors as identified in the WBG CPSD. This will include harnessing investment opportunities and addressing potential constraints in high-priority areas such as education, health care, energy, and innovation while supporting the public sector to ensure an enabling environment for private sector-led growth. These sectors are either geared to strengthen the fundamentals of an innovation-driven economy (education) or to encourage the shift to private sector participation in technologically advanced and innovative sectors (health care and renewable energy). In this context, the Government has expressed interest in IFC support to help transform the country into a regional hub for health care services, including greater support to research and development in the pharmaceutical and biotechnology sectors. Similar efforts are being explored in the higher education and renewable energy sectors. The World Bank could also support reforms aimed at improving level playing field for the private sector, strengthening regulatory institutions for competition, and promoting economic diversification through trade by including such policies in a policy lending program. 42. Mauritius is presented with an opportunity for enhancing the economic development of Rodrigues Island with financial support from the World Bank for expanding the airport. Rodrigues Island has significant untapped potential for economic development, including tourism, to mitigate higher poverty incidence and incomes largely below the national average. The extension of the runway at Rodrigues Airport and improvements to airport infrastructure safety will reduce travel costs and time, improve air access, and make it more affordable—which can be a catalyst for tourism—as well as offer enhanced opportunities for cargo transport and facilitate direct international routes to nearby countries within the regional corridors. Support for the island’s development plan will aim to enhance population resilience, improve evacuation capabilities, and enhance sustainable agriculture and water resource management. Support in these areas may be further explored during the CPF. 15 43. Support of digital entrepreneurship and innovation has the potential to create jobs by leveraging the cross-cutting and catalytic role technologies can play. Digital technologies play an important role in Mauritius’ path toward its ambitious goals of becoming an innovative, inclusive, and resilient high-income economy. Potential areas for WBG support include leveraging data from United Nations Conference on Trade and Development on digital trade, shared information systems, and government data architecture to support interagency coordination and public sector management. Across interventions, the WBG will seek to support the Government in harnessing the digital potential in priority sectors. Part of this support may aim to assist the country facilitate enabling conditions for small business operators and emerging entrepreneurs as well as current reforms on business insolvency and institutional capacity to increase competitiveness and enhance trade. Objective 2: Supporting skills development and quality of education 44. For Mauritius to reach high-income country status, more attention is warranted for the identification and development of skills demanded by innovating and knowledge-intensive firms. As highlighted in the SCD Update and the CPSD, improving the quality and availability of skills in Mauritius is critical to yielding benefits in terms of growth, productivity, and innovation to support inclusive job creation. Education and skills are at the core of the Government’s inclusiveness agenda, yet Mauritius needs to place more attention on developing skills and occupations and ensure complementarity with ongoing and future innovation initiatives. 45. The WBG will continue to support the Government in closing the skill gaps to unlock private investment and reduce disparities in learning outcomes by socioeconomic status. The WBG will support the Government’s effort to better align training and education programs, on-the-job training, Technical and Vocational Education and Training (TVET), and tertiary education to the labor market’s needs. The WBG will furthermore seek to support the Government’s efforts toward ensuring a high quality of education for all, to directly benefit the poor, people with disabilities, and the bottom 40 percent in boosting their economic opportunities and quality of life. The WBG will provide technical support to the Government for making the Mauritian higher education system and curricula competitive, relevant, and aligned with the needs of industry; support the implementation of the new technology stream in grades 10–11, which is geared toward the country’s emerging economic sectors; and extend technical assistance for developing technology-enabled teaching and learning. Blended learning will enhance the education’s system resilience against climate change and crises that cause school closures like pandemics. A central part of the WBG support will be to provide advice to the Government on establishing a tertiary-education education hub for attracting students, talent, and knowledge from abroad. The World Bank could support through a Development Policy Operation (DPO), policy reforms to increase skills through greater trade in higher education services. 46. The CPSD explores options for strengthening private sector participation in the education sector. Although the sector is growing, only a few schools have invested in the development of quality programs so far, limiting private sector participation in the delivery of tertiary education. While the number of higher-quality schools is still small, they demonstrate how tertiary education can be more responsive to the evolving needs of the private sector. Objective 3: Supporting financial sector development 47. The Government has developed a 10-year blueprint for the financial sector and aims to double the sector’s contribution to GDP. The financial sector contributes approximately 13 percent of GDP, but 16 the continued growth of the sector requires modernization of the legal framework, harmonization with international best practices, and improved institutional capacity. This needs to be accompanied by new products and business models such as virtual assets and blockchain applications. Another critical priority is continuous compliance with international anti-money-laundering standards and the effectiveness of the local anti-money-laundering and counterterrorist financing systems. 48. Support for financial sector development is one of the two cross-cutting themes in the country’s program, with special emphasis on institutional strengthening. The WBG will support current reforms to the business-enabling environment, financial stability, and compliance with international standards. This will include removing obstacles in accessing finance by small business operators, such as including the use of movable collaterals in their lending products and supporting the strengthening of digital financial services. The Government’s ambitious plans estimate Mauritius’ investment needs to be US$6.5 billion by 2030. The WBG can provide advisory services for the greening of Mauritius’ financial system. This may include support for developing the green, social, and sustainable bond market in Mauritius, as well potentially as building a destination for the international issuance of such types of bonds. 49. WBG assistance for strengthening the financial sector will rely on existing RAS support and include two additional RAS activities, combined with lending. Support to this objective will include the ongoing RAS for Enhancing Supervisory Capacity of Bank of Mauritius, and Insolvency, Secured Transactions, and Doing Business Reform. The indicative CPF program also includes a RAS on Enhancing the Institutional Capacity of the Bank of Mauritius that will include support for the implementation of a fintech accelerator, and modernizing the central bank’s data management system, as well as support on financial inclusion to SMEs, including on the introduction of a credit guarantee fund. An RAS on Financial Sector Modernization is also envisioned under the CPF program, focusing on enhancing institutional capacity on the insolvency regime, supporting capacity building in the line ministry, and mobilizing long- term financing. 50. IFC will continue to support the Mauritian financial sector with better managing of its climate- related risks through its advisory services aimed at “greening” the financial sector. More specifically, IFC will help better recognize, measure, and monitor the sector’s exposure to climate-related risks, thereby contributing to the growth and sustainability of its lending operations to businesses and individuals in Mauritius and other Sub-Saharan African countries. MIGA will complement Bank initiatives by supporting the expansion of financial sector activities through its guarantees to ABSA and TDB. HLO2: Enhanced Resilience to Shocks 51. As a small island economy, Mauritius is particularly vulnerable to external economic shocks, pandemic impacts, resource degradation, and climate change. Mauritius needs improved policy reform coordination and institutional strengthening to sustain its trajectory toward high-income status while enhancing its resilience. Improved regulatory quality, policy coherence and coordination, and more effective M&E framework are essential. Furthermore, enhanced systems and capabilities to deal with crises will be key to enhancing the country’s resilience against economic crises as well as natural and human-made hazards and climate change. Enhancing resilience will in turn yield significant development benefits—both directly, by protecting the livelihoods of the poor and bottom 40 percent against direct harm and income losses from natural disasters, and indirectly, through productivity and dividends from green growth and a more resilient economy. This HLO builds on focus area 3 of the previous CPF and responds to the recommendation of the SCD Update to strengthen policies and institutions for greater resilience, with added emphasis on enhancing the efficiency of public service delivery and inclusiveness. 17 Objective 4: Improving regulatory quality for better and greener public services 52. Mauritius faces growing challenges with its provision of public utility services in a sustainable manner to yield more effective public investment management in key sectors. Water supply remains a major development constraint, which is being compounded by the impacts of climate change. In health, the rapidly rising costs of health care and the growing burden of NCDs combined with an aging population is expected to put intense pressure on the health system. In addition, a key priority for Mauritius over the next decade will be to improve solid waste management to accelerate its transition toward renewable energy sources. This calls for an enabling regulatory environment that allows for more private sector participation as well as knowledge and technology transfers. This is a modified objective from the previous CPF. 53. Improving water security is critical for maintaining the good quality and availability of potable water supply for Mauritius’ population. Mauritius has reached the limit of sustainable exploitation of its aquifers and the availability of water resources is heavily dependent on rainfall. Mauritius’ annual rainfall has decreased by 8 percent during the last decades, constraining the water sector to meet increasing demands from the growing tourist and residential sectors. The Bank can support assessing the scope for improving water security and desalination as well as climate-smart agriculture. Also, supplementing the previous RAS experience to sector reform and improving the Central Water Authority’s operational and financial performance, the World Bank could support the development and implementation of utilities performance improvement plans and performance-based contracts for service improvement, including nonrevenue water reduction. The latter can be extended to strengthen the role of the regulator to cover more effectively water supply and sanitation services. The WBG can also explore crowding in donor resources to blend the overall financial package to reduce the all-in costs and potentially upsize the funding amounts. Investment in wastewater treatment and alternative water sources such as desalination and reuse are areas that can potentially attract private sector investment. 54. The Government envisions sourcing 60 percent of its electricity from renewable sources by 2030. Reaching the ambitious target of renewable energy will require accelerating renewable energy projects including decentralized solutions like solar farms and rooftops. The WBG can support certain aspects of the energy transition such as providing support for strengthening the regulatory environment for independent power producers (IPPs) to allow for more bankable power projects. The World Bank has mobilized grant financing from the Sustainable Renewables Risk Mitigation Initiative under the Energy Sector Management Assistance Program to provide analytics and advisory services targeted at better integrating renewables in the energy mix, strengthening the current regulatory and legislative framework for independent power producers and mitigating the risk for the private sector. In addition, the Bank may also provide investment financing focusing on grid stability and renewable energy integration, transmission voltage upgrade, and innovative solar photo-voltaic generation with battery storage. The WBG can further provide advisory services to the Government at pre-issuance (for example, soft market sounding, identification of eligible projects, external reviews, etc.) to post-issuance (for example, monitoring, impact reporting, engaging with investors, etc.). 55. Despite the efforts to reduce inefficiencies in the health system, the rapidly rising cost of health care and the NCD burden present challenges for Mauritius. Although maternal health has improved, there is a growing burden of cancer, especially among women. While total health spending is increasing, it is disproportionately skewed toward private out-of-pocket spending. Furthermore, increased total spending on NCDs is mainly due to growing hospital and medication costs. To improve efficiency and reduce costs, especially out-of-pocket costs, the Bank will further explore options for supporting Mauritius to achieve excellence in health care services delivery. This may include devising service models for implementing family doctor schemes; carrying out a cost analysis for improved geriatric care; scaling up 18 plans for the provision of mental health services; improving procurement and usage of pharmaceutical products; and reinforcing health sector governance. Mauritius' new policy paradigm prioritizing innovation and diversification, is an opportunity for IFC to engage especially in the pharmaceutical and biotech sectors. The WBG may also support Mauritius’ aspirations to be a regional health care hub, attracting international patients for specialized care and health services, including oncology, fertility treatments, and sports medicine. Objective 5: Building resilience to climate-related events 56. The threat of climate change to Mauritius’ social and economic infrastructure and the wellbeing of its population has become more acute, increasing the importance of mitigation measures. As climate change will inevitably affect the frequency and severity of future natural shocks in Mauritius, the lack of disaster response system enabling quick socio-economic and livelihood recovery, in case of major impacts, represents the real challenge for a small island state like Mauritius. Mauritius is highly exposed to climate shocks with tropical cyclones, floods, and earthquakes being the most frequent hazards. Mauritius is also vulnerable to severe coastal erosion, coastal flooding, and storm surges. Because it relies heavily on its coastal zone for economic development, critical infrastructure and housing are located along the coastline, making them vulnerable. The impacts of these hazards will worsen with climate change and sea- level rise. Measures to understand the fiscal and social impacts of climate risks and to implement measures to reduce and transfer these risks will be critical to building Mauritius’ climate resilience. 57. The WBG will support the Government’s effort to enhance resilience against climatic impacts and natural hazards. The WBG rationale for engagement will support four areas: (i) early warning systems, emergency preparedness, and response; (ii) integrated coastal zone management; (iii) disaster risk financing; and (iv) solid waste management. The World Bank may support the Government in working out food security scenarios and strengthening food production by looking at environmental issues related to agriculture production, as flooding and declining soil quality are starting to pose new challenges. WBG support, besides advisory services, and analytics, could also include IBRD contingent financing in the form of a catastrophe deferred drawdown option for immediate support of specific post-disaster expenditures. The WBG could also support the Government in building capacity and developing a comprehensive disaster risk management financing approach that includes risk transfer to international capital markets through catastrophe bonds or insurance. Through a DPO, the World Bank could support reforms aimed at strengthening economic resilience against climate shocks and dependency on fossil fuels. 58. The Government has developed an ambitious solid waste management program and seeks WBG support. The Government plans to divert waste from landfill to recycling from 5 percent in 2022 to 70–75 percent by 2025. In that regard, WBG assistance will include (i) improving national and regional analytical knowledge on solid waste management and marine plastic pollution; and (ii) strengthening policies and identifying critical investments with a focus on promoting a circular economy, recycling, and composting. There are also untapped opportunities for private sector investments in a circular economy such as recycling, composting, and waste-to-energy that Mauritius can explore. As Mauritius strengthens the legislative framework for recycling (in particular on polyethylene terephthalate), and progresses with composting operations, IFC will seek to explore opportunities for supporting private sector investments in the circular economy, drawing on its Seychelles experience. Objective 6: Strengthening public financial management and planning 59. Mauritius’ public sector is effective when compared within the regional cohort; however, asserting high-income status demands a higher degree of policy coherence and coordination to 19 strengthen planning, accelerate implementation, and maximize efficiency. The macroeconomic policies continue to present important medium-term challenges that are likely to be exacerbated by the recent changes in global food and oil prices, higher global interest rates, and slow recovery in tourist arrivals. To ensure better public spending results, transparency improvements, and upgrade of regulatory frameworks, Mauritius will need to strengthen its planning capacity. Public procurement can be strengthened to enhance implementation of public programs and infrastructure projects. Furthermore, the increasing use of off-budget instruments creates challenges for the effectiveness of the budget and multi-year plans for fiscal management and potentially increases fiscal risks. Mauritius also needs to address the mounting fiscal imbalances by realigning expenditure towards productive investments, building human capital and resilience from climate change. It also needs to improve the cost-effectiveness of public spending and improve revenue collection. There is a lack of traction in the dialogue on social protection reform, particularly on pensions, despite increasing costs of the basic retirement pension against a growing aging population. The World Bank stands ready to engage and continue the policy dialogue in this critical area, subject to demand from the Government. This is a modified objective from the previous CPF and is in line with the SCD Update, which identifies public sector efficiency as a priority area. 60. WBG support for this cross-cutting objective will prioritize two areas of engagement to better enable the delivery of social services and government programs. The World Bank will support the Government on (i) following up on the key measures and reforms identified by the FY23 Public Expenditure Review (PER), with a focus on improving the quality of spending, raising tax revenue, and improving debt sustainability; and (ii) strengthening public financial management and public procurement against misuse, mismanagement, or capture. The AfDB and the World Bank along with the Procurement Policy Office have assessed the public procurement system following the Methodology for Assessing Procurement Systems, which will guide WBG support. Part of the effort under this objective will also involve working with Statistics Mauritius to strengthen evidence-based policy making. The World Bank will continue to undertake macroeconomic monitoring, complemented by technical consultations with the authorities, including on fiscal consolidation. 61. Within this objective, the WBG may support the Government through a combination of policy lending, ASA and potentially RAS. Besides support to improving public procurement, the World Bank will explore potential RAS support to strengthen project management, private capital mobilization, and e-government assessment. The World Bank is also engaged in behavioral approaches to boost youth employment and in tax- related interventions. The World Bank will continue to support the Government in increasing the operational capacity of the Planning Bureau, which was set up to strengthen the institutional capacity of the Ministry of Finance, Economic Planning and Development. Building on this, the World Bank will support the Government in strengthening its planning framework as a key contribution to strengthening public sector management. The World Bank can include in a programmatic DPO reforms to address policy and institutional issues in public finance management. 3.5. Indicative WBG Program 62. In line with the recommendations of the CLR, the WBG will pursue a flexible engagement under this CPF to allow support for emerging opportunities. At the onset, the CPF objectives are supported by a robust WBG portfolio of knowledge services through cost-sharing arrangements with the Government (Table 2), complemented with a lending program under development, which is considering budget support. A series of priority activities, including RAS support, have been identified for potential support in the short term, based on their alignment with immediate government priorities and strategic relevance to the HLOs. Furthermore, the WBG will leverage its policy role to guide and sustain progress on the HLOs, 20 drawing on core diagnostics during the CPF, including PER, Country Economic Memorandum (CEM), Climate Change and Development Report (CCDR), CPSD, and economic policy updates. Table 2. World Bank Indicative Knowledge Program* Year Activity Type RAS (y/n) FY24 Knowledge-Sharing Platform Advisory Y Blue Economy Advisory Y Vision for the Mauritian Tourism Sector Advisory Y Education Hub Advisory Y Closing Skills Gap and TVET Reforms Analytical N Digital Skills and Blended Learning Analytical N Financial Sector Modernization Advisory Y Affordable Housing Advisory N Resilience Advisory Y National Risk Assessment Advisory Y Public procurement Advisory Y FY25 Effectiveness of Government Support on Inequality Analytical N FY26 Climate Change and Development Report Advisory N * There are also discussions on RAS support to Water and Desalination. 63. IBRD financing is available to Mauritius, and the Government has expressed interest to borrow from the World Bank to finance strategic priorities.19 In addition to the recent request for the World Bank to invest in improving the connectivity of Rodrigues Island, the Government has also requested IBRD financing for renewable energy, blue economy, as well as budget support to bridge its budget financing gap (Table 3). Dialogue is ongoing with the Government to provide detailed terms, risk management features (for example, currency, interest rate, maturity, and others), financial scenarios, and comparisons to other sources of external funding. Actual new IBRD lending will depend on demand from other World Bank borrowers and factors, including global economic developments, which affect IBRD’s financial capacity. In addition, the Government can take advantage of risk management solutions to fix the interest rates of the current outstanding IBRD loan portfolio to minimize the impacts of interest rate hikes and volatility. Table 3. World Bank Indicative Lending Program Year Project Instrument US$ Million FY24 Rodrigues Runway Project IPF 184 FY24 Mauritius Renewable Energy Transition IPF 70 FY24-25 Programmatic DPO DPO 250* FY25 Resilience IPF TBD FY25 Blue Economy (port development) IPF TBD * The size of the second DPO will be agreed based on needs. 64. All IBRD financing operations supported under the CPF will be aligned with the goals of the Paris Agreement. Consistent with the WBG Climate Change Action Plan 2021-2025, financing operations provided to Mauritius will support the deployment of lower-carbon options as applicable, whenever technically and economically feasible, and prevent carbon lock-in. WBG support will ensure that material climate risks have been assessed and reduced through the design of the operation to an acceptable level. As countries have differentiated circumstances in implementing the Paris Agreement, such assessments will be operation-, context-, and time-specific, and for a given set of development objectives. 19 Mauritius has borrowed about US$350 million from IBRD since 2008, all of which has been disbursed and is repaying. 21 3.6. Implementing the CPF 65. During the five-year CPF implementation period FY24-FY28, the CPF program will support Mauritius with a full array of lending and non-lending instruments to attain its CPF strategic goals. Building on the previous CPF and the knowledge-based partnership, the WBG program will continue to support the Government with knowledge and policy advice, including through RAS and strengthen local capacity and institutions. The RAS program is expected to support competitiveness and diversification, education and skilling, renewable energy, and financial sector management. The engagement of the Government around the core ASAs is critical to guide the overall policy dialogue in support of Government objectives including macroeconomic stability and climate change through core diagnostics such as a PER, a CEM, and a CCDR. 66. The WBG support and country engagement will continue to be coordinated with other development actors, including the EU, Agence Française de Développement, the United Nations (UN), bilateral partners, and international financial institutions. The WBG’s comparative advantage remains in bringing technical depth, global knowledge, and credibility with other multilateral or bilateral partners present in Mauritius, the UN, and International Financial Institutions, such as the International Monetary Fund (IMF). The overall coordination of technical assistance, although with room for improvement, is a key implementation instrument for advancing and supporting Government’s institutional and sector reform agenda. 67. As Mauritius is above the IBRD GDI level, WBG support will be in line with its approach toward potential IBRD graduates. During this period, the WBG partnership with the Government will emphasize non income factors, such as access to external capital markets on reasonable terms and demonstrating progress with establishing and strengthening key institutions for economic and social development. The IBRD activities will have a primary focus on interventions to strengthen policies and institutions, including managing spillovers of regional or global crises, generating lessons and knowledge, and providing innovative solutions to low-income countries in the region. The additionality of IFC investments will help to provide critical financial and non-financial services not available on the market. IFC will prioritize investments that benefit innovation, inclusion, frontier areas, and best practices. IFC will also focus on interventions that catalyze private sector solutions, strengthen domestic capital markets, and support resources for private capital mobilization. 68. The WBG approach for maximizing public and private finance for development will aim to mobilize capital, expertise, and solutions from all sources in support of Mauritius’ aspirations to reach high-income status. In this context, IFC will seek to deepen its engagement in Mauritius in selected sectors, which will contribute to Government’s response to multiple crises, while supporting the achievement of the CPF HLOs. This includes support to sectors that can contribute to its economic diversification and knowledge-intensive economy. The World Bank can further this agenda with advisory services and financing focused on attracting private capital to key sectors, such as renewable energy and nature-based investments. MIGA, in close collaboration with IBRD and IFC, will explore opportunities to support foreign investors in Mauritius, paying close attention to projects that support job creation and green development. 69. The implementation of the WBG program will draw on the lessons from the CLR to increase the effectiveness of the WBG knowledge services for a higher impact on institutional and policy reforms. These include better selectivity and agreeing upfront on realistic targets and funding modalities with the Government; reflecting political economy risks and capacity issues in the design and implementation arrangements; putting an emphasis on implementation support of government priority initiatives or complementing ongoing capacity building efforts; and more strategic communication and dissemination. 22 70. The CPF will also seek to leverage further integration of the Mauritian economy into the broader African continent, building on the opportunities presented by the Africa Continental Free Trade Agreement and the African Union’s initiative for the creation of a single digital market. In line with the WBG strategic objective of strengthening regional integration in Africa, IFC will explore opportunities to support the Mauritian private sector for outbound investments and growth on the African continent, facilitating south-south investment opportunities and skills transfer to other countries in the region. Mauritius may also benefit from a Regional Digital Integration Project for East Africa, which is a public good provision of a framework of regional digital integration to include Southern Africa and the Indian Ocean islands. 71. The CPF design gives sufficient flexibility and allows the WBG to respond to new demands and emerging opportunities. The CLR highlights that the flexible design of the previous CPF proved to be a the right strategic approach in an upper-middle-income country like Mauritius. The built-in flexibility in the CPF program requires the selection of engagements to be periodically validated with departments and relevant agencies during the CPF implementation period to assess progress and develop new programs for the outer years of the CPF period, after the PLR. 72. Based on early implementation, it is expected that some course correction might be needed in the near term as the indicative program continues to evolve in response to client demand. To facilitate adaptive learning and ensure an impactful WBG engagement, the WBG and the Government will choose an appropriate window to carry out a PLR to adjust the program and review the Results Framework, including by introducing results indicators reflecting the lending program under development. IV. MANAGING RISKS TO THE CPF PROGRAM 73. The overall risk assessment is moderate considering emerging areas of relative weakness amplified by the impacts of the COVID-19 pandemic. The economic and institutional risks identified by the last PLR remain relevant without major changes. The WBG will seek to mitigate risks, but the scope for mitigating these risks is limited given the modest and mainly knowledge driven WBG engagement. 74. Macroeconomic risks are substantial given pre-COVID trends, the impact of the pandemic, uncertainties caused by global challenges, and the recent weakening of macro-fiscal institutions. Mauritius faces risks due to persistent deficits, high public debt, rising contingent liabilities, and fiscal pressures, particularly from pension expenditures. The country is also vulnerable to climate risks and external shocks. The World Bank will continue monitoring the macroeconomy with the IMF throughout the CPF period, emphasizing fiscal consolidation and implementation of the key findings of the PER. Regular macroeconomic monitoring and technical consultations with authorities and the IMF will be conducted to provide rapid and effective assistance should need emerge. Financing from IBRD could also be deployed for efficient fiscal support if necessary. 75. Mauritius will be facing increasingly more complex multisectoral reforms, making apparent weaknesses and gaps in institutional implementation capacity a substantial risk. Mauritius’ track record as a reform-oriented country has been substantial and most sectoral institutions are effective. However, pending reforms to be implemented in the post-pandemic period will require more complex, multi- sectoral solutions. Managing these risks will need renewed attention to policy coherence and implementation capacity across government agencies and will be supported by the work program proposed under CPF Objective 6. 23 76. Mauritius’ ambitious development agenda set up in Vision 2030, both in scope and complexity, may run against capacity limitations in pursuit of multiple simultaneous reform goals. The CPF five-year horizon will allow for the mitigation of these risks, as it provides an adequate timeframe for necessary strategic adjustments of the engagement and the program to best serve Mauritius’ evolving needs as these arise. Table 4. Risks to the Mauritius CPF Program Risk Category Rating 1. Political and governance Moderate 2. Macroeconomic Substantial 3. Sector strategies and policies Moderate 4. Technical design of project or program Low 5. Institutional capacity for implementation Substantial 6. Fiduciary Moderate 7. Environmental and social Low 8. Stakeholders Moderate Overall Moderate 24 Annex 1: CPF Results Matrix High-level outcome 1 – improved job creation Mauritius is outgrowing its comparative advantage in traditional and labor-intensive sectors. To create jobs for the future, a new policy paradigm based on innovation and diversification could give a much-needed boost to the expansion of competitive new industries, such as the blue economy and the pharmaceutical sectors, as well as technological upgrading of existing ones. Addressing bottlenecks to growth and job creation will involve enhancing skills development and quality of education as well as strengthening financial sector governance to support incoming financial flows and ease financing constraints by business operators. This high-level area supports the Government’s Vision 2030 first pillar (“Strong Economy”) and third pillar (“Coherent Social Development and Inclusive Society”); and two strategic areas of the 2020–24 Government Program (“Inclusiveness at the Heart of the Nation” and “Building the Economy of the Future”). This HLO modifies the Focus Area “Increasing Competitiveness” in the previous CPF. High-level outcome indicators Data source Current value20 (a) Unemployment rate (a) Statistics Mauritius (a) 48,400 or 9.1% (female: 10.6%) (2021) (b) Labor productivity (GDP per worker) (b) Statistics Mauritius (b) 1.9 percent (2019) Rationale: Reducing poverty in Mauritius and transitioning to high-income status will involve economic diversification, higher value-added, and creating more and better formal sector jobs. Mauritius has implemented innovation-oriented policies to boost competitiveness, which have generated some results, yet competitiveness has continued to decline in many traditional sectors. Gender gaps in the labor market persist. While opportunities for upgrading within and across industries as well as for the regionalization of production chains continue to exist, growth in nontraditional manufacturing activities has so far not been enough to compensate for the decline in traditional less sophisticated sectors. A more systematic approach to competition and innovation is needed – an approach endogenizing the process of economic discovery, creating more entrepreneurship-driven growth. Skills shortages and mismatches are key obstacles to economic development at various levels, underutilizing the labor force potential, particularly of youth and women. Institutional leadership can drive the skills agenda and enhance interagency coordination and engagement with the private sector. Data-based and technology-driven solutions and application of big data and maritime digitization will add high-value to knowledge-intensive sectors and diversification of the ocean economy. For its successful transition to high-income status, Mauritius will furthermore have to spur its long-term financing capacity, especially by developing equity and venture capital markets, and project finance markets to attract institutional investors. WBG engagement: Contributions to HLO1 will include: (i) supporting policies to enable economic diversification, knowledge-intensive activities, and digital economy; (ii) enhancing skills development and quality of education; and (iii) supporting financial sector development. WBG interventions will aim to help the Government revisit policies and focus on higher value-added sectors through innovation. WBG will also support the Government’s efforts to raise the quality and availability of skills and address key bottlenecks and reforms in the education sector, which will support the Government’s ambitions of establishing an education hub. In addition, WBG interventions may support the Government’s goals to improve labor market institutions, promote labor- entry and eliminate gender gaps in line with the new National Gender Policy. Building on previous support, the WBG will continue to assist with the modernization of the financial sector and enhance the institutional capacity of the Ministry of Financial Services and the Bank of Mauritius. Knowledge gaps: The 2022 SCD Update highlights the importance of innovation and the development of relevant skills for Mauritius’ growth mode l as well as the identification and formation of skills demanded by innovative firms and activities. While surveys of the skills demand are available more attention is needed on nontraditional skills and occupations and their complementarity with ongoing and future innovation initiatives. 20 CPFs track the trajectories of HLO indicators but do not formulate target values. 25 SDGs associated: • SDG 1: End poverty in all its forms everywhere • SDG 5: Achieve gender equality and empower all women and girls • SDG 8: Promote sustained, inclusive, and sustainable economic growth, full and productive employment, and decent work for all • SDG 9: Build resilient infrastructure, promote inclusive and sustainable industrialization, and foster innovation • SDG 14: Life below water CPF objective 1: Enhancing competitiveness Revisiting policies of government support to mature industries and reallocation of resources to private sector driven innovation is key to putting Mauritius on a higher, productivity-led growth path, diversifying the economy, and creating more jobs for men and women. Improved connectivity will help to ensure economic integration, diversification, and job creation on Rodrigues Island. This is a modified objective from the previous CPF.21 Rationale and World Bank Engagement: In line with the SCD Update and the 2021 CEM, measures to support Mauritius’ reforms to promote a new growth model based on innovation and productivity include enterprise development, formulating programs to finance co-investments in strategic sectors (pharmaceutical and biomedical), and enabling the expansion of fisheries, renewable energy, and the digital economy (fintech). To drive forward the reform agenda for market creation in key sectors, Mauritius needs regulatory reforms for the elimination of distortions to entry, exit, and rivalry and the development of a modern national innovation system. Government support is not well aligned to boost productivity and enhance innovation. Trade and domestic product diversification in Mauritius will require (i) regional integration for market expansion especially for a small island economy like Mauritius; (ii) investments and policy reforms for reducing trade costs; (iii) effective policies for reallocation of resources toward higher value-added activities; and (iv) strong business coalitions to align public and private sector stakeholders on a broad set of diversification policy issues from skills to regulation, access to finance and trade, and promotion of foreign direct investment and taxation. There is a further need to improve connectivity for Rodrigues Island, in a sustainable manner, thereby reducing “economic distances” between Rodrigues and Mauritius. Support will be based on the engagement during the previous CPF, which contributed to the overall improvement of the business environment by removing trade barriers and support to key reforms aimed to increase employment in higher value-added sectors. The joint IFC-World Bank CPSD will detail policies and reform needs as well as opportunities for private investments and IFC support. MIGA will support opportunities of supporting FDI into Mauritius, as well as investment flows into South Saharan Africa, channeled through Mauritius, promoting regional integration. Lessons learned and new knowledge at the program level: In line with the findings of the CLR, IFC will actively pursue new markets, complemented by World Bank support, including RAS. Potential emerging areas to explore include the nexus between the education and innovation ecosystems, support for the internationalization of Mauritian firms in the broader African region, renewable energy solutions, and private sector participation to enhance health sector service delivery. WBG ongoing and planned support to this CPF objective: Under this objective, the WBG will: (i) support measures to enable the growth of new, knowledge- intensive sectors, by evaluating existing innovation-related government programs; reviewing competition practices in the country; supporting reforms leveraging IFC investment opportunities; and (ii) support post-COVID-19 recovery of the tourism sector, with focus on diversification of markets, and socially inclusive, environmentally sustainable development. The World Bank will also provide financial support for the upgrading of the runway at Plaines Corail Airport on Rodrigues Island to support the development of the local island economy, its regional connectivity, and the implementation of a government development plan supported by the EU. IFC is exploring options for investments in the country—including education, renewable energy, medical devices, and the pharmaceutical industry. Building on its 2017 report for the development of the Ocean Economy in Mauritius,22 the World Bank will continue to support the Government’s ambition to develop the blue economy and benefit from operationalizing the findings of the report around fisheries, tourism, and other related oceanic sectors. 21 Objective 1 in the 2017 CPF focused on improving the environment for regional trade and investment. 22 See Sustainable and Integrated Development of Oceanic Sectors in Healthy Oceans, World Bank, 2017. 26 Key risks and mitigation: (i) institutional and capacity gaps to implement complex policies for innovation, competition, and economic diversification; (ii) political economy and path-dependent industrial policies; and (iii) lack of a predictable and transparent business environment for testing new products and markets, ensuring intellectual property rights protection, transparent and nondiscriminatory regulatory environment. The WBG will monitor closely if such risks materialize and adjust interventions at the PLR stage, if relevant. CPF Objective Indicators Supplementary Progress Indicators WBG Program Indicator 1.2: Strategic advice provided for SPI 1.1: Adoption of a comprehensive Marine Ongoing ASA: adopting mid-term national framework for Spatial Plan • Public Expenditure Review sustainable fisheries Baseline [2022]: No • RAS: 10-year Blueprint for the Tourism Sector Baseline [2022]: No Target [2025]: Yes Target [2028]: Yes Source: Ministry of Blue Economy, Marine Potential new lending: Source: Ministry of Blue Economy, Marine Resources, Fisheries and Shipping • Rodrigues Runway Project (FY24) Resources, Fisheries and Shipping • Programmatic DPO (FY24; FY25) SPI 1.2: Advisory policy note on a 10-year • Blue Economy (FY25) Indicator 1.3: Number of jobs created in the strategy blueprint for Mauritius’ tourism tourism, agriculture, and agro-processing sector Potential ASA: sectors on Rodrigues Island Baseline [2022]: No • RAS: Blue Economy (FY24) Baseline [2022]: 0 Target [2025]: Yes • Effectiveness of Government Support on Target [2028]: 3,250 Source: Ministry of Tourism Inequality (FY25) Source: Ministry of Transportation; Statistics • Poverty Monitoring (FY23–FY27) Mauritius CPF objective 2: Supporting skills development and quality of education Strengthened TVET and tertiary education will further promote inclusiveness of Mauritius’ labor market and support the country’s competitiveness, improvement of labor market institutions and better alignment of training and education programs, including on the job training. This is modified objective from the previous CPF. Rationale and World Bank Engagement: Mauritius human capital index (HCI) stands at 0.62 (2020), that is, a child born in Mauritius will only be 62 percent as productive as if in full health and fully educated. Although this HCI is one of the highest in Africa, it ranks low compared to upper-middle-income countries. Critical obstacles to economic development are skills shortages and mismatches at various levels and underutilized potential in the labor force, particularly of youth and women. There is a need to ensure institutional leadership to drive the skills agenda, coordinate the implementation of the National Skills Development Strategy with all relevant stakeholders, and ensure consistent engagement with the private sector. The WBG has built an excellent relationship with key actors in the education sector through the successful completion of an education RAS program under the previous CPF. Building on this, the WBG can support the Government in closing the skill gaps to unlock private investment and reduce the large disparities in learning outcomes by socioeconomic status. Lessons learned and new knowledge at the program level: Innovation and development of relevant skills are important for Mauritius’ growth model and more attention is warranted to the identification and formation of skills demanded by innovative firms and activities. While skills demand surveys are available for Mauritius, carried out by the Human Resource Development Council, more attention to nontraditional skills and occupations and their complementarity with ongoing and future innovation initiative is warranted. WBG ongoing and planned support to this CPF Objective: The World Bank will support capacity building activities for high-level Mauritian educators and policy makers tasked with development of a strategy and action plan for enhancing industry-aligned skills development and TVET curriculum development, drawing on international experience and good practices and leveraging collaboration with industry partners within the country. Support in this area would 27 focus on (i) preparation of the national vision, strategic plan, and roadmap for higher education; (ii) provide guidance and advice for the preparation of a Education Hub; (iii) support for development of a curriculum framework for the technology stream, and plan for teacher training to implement the new stream in select schools; and (iv) technical support for development of blended learning under Mauritius’ Technology -Enabled Teaching and Learning Strategy and its implementation throughout the education system. Key risks and mitigation: (i) weak uptake or limited Government ownership; (ii) capacity and resources shortage for implementation; (iii) frequent changes in ministerial and senior management levels and occasional restructuring of portfolios causing shifts in priorities and lack of continuity. In line with the CLR, these risks will be mitigated by ensuring that the needs, scope of work, and key deliverables are clearly defined upfront with close attention to implementation modalities. CPF Objective Indicators Supplementary Progress Indicators WBG Program Indicator 2.1: Roadmap for higher education SPI 2.1: Advisory service/TA for the higher Potential new lending: and plan for establishing the education hub education strategy development provided, • Programmatic DPO (FY24; FY25) formulated and adopted by the Government of including education hub development Mauritius. Baseline [2022]: No Potential ASA: Baseline [2022]: No Target [2025]: Yes • RAS: Education Hub (FY24) Target [2028]: Yes Source: Ministry of Education • Closing Skills Gap and TVET Reforms (FY24) Source: Ministry of Education • Digital Skills and Blended Learning (FY24) Indicator 2.2. Curriculum framework for the SPI 2.2: Advisory service/TA provided for technology stream in grades 10–11 and related review of the new curriculum framework, and syllabi and textbooks for 16 new subjects for the plan to train teachers assigned to formally reviewed for quality; and teachers implement the new Stream in the first batch trained to teach them in the first batch of 12– of 12–14 schools. 14 schools. Baseline [2022]: No Baseline [2022]: No Target [2025]: Yes Target [2028]: Yes Source: Ministry of Education Source: Ministry of Education SPI 2.3: Advisory service/TA provided for Indicator 2.3. National EdTech Strategy and formulation of Mauritius National EdTech implementation plan for all subsectors of Strategy for the education sector education adopted Baseline: (2022): No Baseline [2022]: No Target (2025): Yes Target [2028]: Yes Source: Ministry of Education Source: Ministry of Education CPF objective 3: Supporting financial sector development The financial sector contributes to approximately 13 percent of GDP, and the Government has developed a 10-year blueprint with an intention of doubling the sector’s contribution to GDP through modernization of the financial system and introduction of new products and services. However, growth in this sector will be subdued without modernization of the legal framework, harmonization with international best practice, and improved institutional capacity. Another important consideration is the continuous compliance with international Anti-Money-Laundering (AML) standards and improving the effectiveness of the local AML/Countering Financing of Terrorism (CFT) systems. Related priorities for the sector include better access to finance by small business operators, as well as developing capital markets to mobilize long-term financing for development, including from the private sector. This is a modified objective from the previous CPF. 28 Rationale and World Bank Engagement: The Government is looking to strengthen its financial stability and soundness by adopting international guidance and best practices. Key priority areas include improving banking supervision, modernizing the regulatory framework, and implementing the Financial Action Task Force action plan. Furthermore, current reforms to promote stability in the financial system will be critical to ease financing constraints for small business operators, such as to include the use of movable collaterals in their lending products as well as the provision of risk mitigation to enhance market-based arrangements for credit allocation. Under the previous CPF, WBG support helped the Government put in place stronger regulatory and supervisory arrangements and frameworks to manage system-wide stress and ensure continued financial sector resilience. Lessons learned and new knowledge at the program level: A continuous engagement with the client on policy dialogue is important, even in the absence of a formal work program. The World Bank needs to stand ready to assist with analytical and advisory services as demand arises in regard to assistance provided by other development partners (for example, the IMF, the EU). This objective can best be served if the World Bank keeps a longer-term and independent statutory role in response to Government demand. WBG ongoing and planned support to this CPF Objective: The WBG will support the Government to remain compliant with international standards, strengthening institutional capacities, and supporting the registration amendments as needed. The WBG will also continue supporting reforms to ensure that financial institutions fully embrace the use of movable collaterals in their lending products. Specific requests have been made regarding (i) the Virtual Asset-Capacity Building Program; (ii) guidance and support in reviewing the national AML/CFT risk assessment exercise; (iii) guidance to conduct the proliferation financing risk assessment; (iv) TA to conduct a risk assessment of legal person and arrangement; (v) TA to support equivalence of the insurance legislation; (vi) Capacity Building for Fintech; (vii) TA to build capacity of the Financial Services Institute to develop capacity for the financial services sector; (viii) TA to develop a fintech solution on consumer protection; and (ix) support the introduction of a credit guarantee fund. Furthermore, the WBG can help strengthen the digital financial services ecosystem including more up-to-date legislative framework; improved infrastructure and developing national initiatives. IFC is exploring support to the growth and sustainability of the banking sector in Mauritius, through advisory services aimed at helping commercial banks better assess and mitigate climate-related financial risks across its business portfolio and strengthen its credit risk reporting practices. MIGA will continue to support the financial sector through its existing guarantees. Key risks and mitigation: The main risks are political and governance of nature. Investors’ confidence in using Mauritius’ financial sector institutions depends on strong regulatory and supervisory arrangements, and sector resilience against stress and instability, as well as transparency, and effective controls. Any deterioration of these can have severe sectoral and economy-wide impacts. The next Financial Sector Assessment Program, due during the CPF cycle, will continue to assess and recommend fixes and mitigation measures. CPF Objective Indicators Supplementary Progress Indicators WBG Program Ongoing ASA: Indicator 3.1: Value of outstanding loans made SPI 3.1: Collateral Registry established and • RAS: Mauritius – Enhancing Supervisory to MSMEs (or SMEs) operational Capacity of Bank of Mauritius Baseline [2022]: MUR 1.2 billion Baseline [2022]: No • RAS: Mauritius National Risk Assessment Target [2028]: MUR 1.6 billion Target [2028]: Yes IFC: Source: Bank of Mauritius Source: Bank of Mauritius • Bank One, including climate finance advisory program Indicator 3.2: Proportion of MSMEs or SMEs SPI 3.2: Credit Guarantee Fund established and • Adenia III, V with a loan or line of credit (Percentage) operational • CGF-SI Baseline [2022]: 56% Baseline [2022]: No Target [2028]: 75% Target [2028]: Yes MIGA: • Absa Group of South Africa Source: Bank of Mauritius Source: Bank of Mauritius • Eastern and Southern African Trade and Development Bank Proposed ASA: • RAS: Financial Sector Modernization (FY24) 29 High-Level Outcome 2 – Enhanced Resilience to Shocks Although Mauritius’ governance and institutions are stable, Mauritius continues to face challenges in formulation and impleme nting coherent cross- sectoral policies and programs. Procurement is cumbersome, leading to delayed implementation of major infrastructure works. The regulatory frameworks in key sectors, including water and energy, need strengthening. Addressing this challenge is essential for effective service delivery and improved resilience against external economic and climate-related shocks. This in turn would yield significant direct development benefits – both by protecting the poor and the livelihoods of the bottom 40 percent of the population against direct harm and income losses; and indirectly, through productivity and dividends from exploring green growth opportunities and building a more resilient economy. This high-level outcome supports the firth pillar of Government “Vision 2030” (“Sustainable Development”), and the strategic area of the Government Program (2020–2024) on “Sustainable and Green Society.” This HLO continues the effort under the previous CPF Focus Area “Bolstering Resilience and Sustainability.” High-level Outcome Indicators Data source Current value (a) Improved water use efficiency (a) FAO AQUASTAT (a) 19.32 US$/m3 (2020) (b) Increase share of renewable energy (b) Central Electricity Board (b) 20.1 percent (2021) (c) Increase in coping capacity risk hazard, (c) INFORM risk Country Profile Index (c) 154 (2023 ranking) exposure, and vulnerability Rationale: Mauritius’ aspirations to reduce poverty and achieve high-income status require a resilient public sector that is able to adapt and respond to change quickly, maintain critical operations and services, as well as provide support and services to people, businesses, and communities. It will be important to address the prevalent overlap of programs and lack of evidence-based performance monitoring, notably in policy areas impacting the poor and the bottom 40 percent of the population. Increased transparency and accountability of the public procurement system will improve further service delivery and quality infrastructure. A more cost-efficient public sector could yield benefits in other policy areas, including through fiscal savings and improved delivery of public services. Furthermore, by building the resilience of key growth sectors to rising climate impacts, and by strengthening crisis preparedness, Mauritius will be able to sustain economic growth better and longer. WBG engagement: Contributions to HLO2 will come from WBG support to (i) improve regulatory quality for better and greener public services; (ii) build resilience to climate-related events; and (iii) strengthen public sector management. The WBG engagement will focus on improving the regulatory framework for water provision and supporting the country’s ambitious targets for renewable energy generation as well as enhan cing its disaster risk management systems and procedures. The WBG may also support the Government to embed public sector efficiency and potentially the efficiency of social protection/pension reform in evidence-based and M&E-informed policy decisions. The WBG will indirectly support improvements in the e- procurement legal framework, disclosure of bidding opportunities, and contract awards including beneficial ownership and complaint system. WBG support for the social protection and labor-entry system will reduce the inequity of outcomes, complementing WBG support under HLO1. Knowledge gaps: While aggregate data on the implications of climate change and natural disasters are available for Mauritius, a more granular understanding of the development impact of climate change, including by geographic areas and population groups, will be important to inform and prioritize adaptation policies. More analysis is needed on issues related to land ownership, use, and development. Further knowledge generation is needed regarding spatial planning and urban development, which are key to understanding the implications for Mauritius of climate change adaptation and efficient public and private investment in transport, public and private transport decarbonization, and public utilities. SDGs associated: • SDG 6 Ensure availability and sustainable management of water and sanitation for all • SDG 7: Ensure access to affordable, reliable, sustainable, and modern energy for all • SDG 13: Take urgent action to combat climate change and its impacts • SDG 16: Promote peaceful and inclusive societies for sustainable development, provide access to justice for all, and build effective, accountable, and inclusive institutions at all levels 30 CPF objective 4: Improving regulatory quality for better and greener public utility services As the economy grows, Mauritius faces growing challenges with the provision of public utility services in a sustainable manner. Water supply remains a key development constraint, which is being compounded by the impacts of climate change. Another priority for Mauritius is to divert solid waste from going to the landfill by promoting composting and recycling and to transition to renewable sources of energy. To do this, the country needs an adequate enabling and regulatory environment, allowing for more private sector participation as well as knowledge generation and technology transfers. This is a modified objective from the previous CPF.23 Rationale and World Bank Engagement: To strengthen resilience, improve water security, and reduce the demand-supply gap, Mauritius needs to tap the potential of desalination and water reuse. In parallel, it is key to improve the performance of water utility and quality services, with a focus on reducing the high levels of non-revenue water and intermittence in water supply. Climate mitigation also presents opportunities as the country transitions to a green and sustainable economy guided by the Government’s Renewable Energy Roadmap 2030 and the ambition of having 60 percent renewable energy in the electricity mix by 2030. To achieve this ambitious energy transition, the country needs to strengthen its regulatory environment to allow for more bankable utility-scale power projects. This will include the development of an Independent Power Producer framework, improved sector planning with regards to supply and demand as well as grid infrastructure for Variable Renewable Energy integration, development of standardized bidding documents, and development of risk mitigation instruments. In addition, decentralized solutions like solar rooftops can further be explored. Lessons learned and new knowledge at the program level: IFC has been active in this space during the last CPF cycle, and close coordination and division of labor between the World Bank and IFC will be key to drive progress on this objective. Identifying an investment program involving the private sector is necessary for an effective upstream advisory role by the World Bank. The World Bank has previously provided RAS and ASA support to water sector reform, including institutional support for PPP. The CLR underscores that the World Bank’s advisory role can be highly effective when there is a clear sector reform objective. WBG ongoing and planned support to this CPF objective: The WBG will provide assistance to address water supply deficits and support energy transition, including infrastructure, policy reform, and the use of technology. Specifically, on water management, the Bank will assess options for improving water security, including exploring opportunities to (i) tap the potential of desalination plants to increase water production for domestic supply, including solar- powered; (ii) tap the potential of water reuse for irrigation and industry; and (iii) reduce non-revenue water. The WBG will also seek to support regulatory reforms of the energy transition, both by leveraging trust funds and potentially through an RAS. Key risks and mitigation: Key risks relate to sectoral implementation capacity, that is, the small project scale, tariff setting, and PPP capacity. Furthermore, the World Bank's experience with water sector support in Mauritius suggests that service sector reforms, including service charges and tariff adjustments, are highly dependent on political will and electoral cycle factors. Risk mitigation requires establishing clear sector reform objectives involving all major stakeholders at the outset, well-defined outputs, and an effective dissemination/sharing strategy of the ASA products. CPF Objective Indicators Supplementary Progress Indicators WBG Program Indicator 4.1: Water security roadmap and SPI 4.1: Technical report and roadmap for assessing the Potential ASA: integrated utility performance improvement options for restoring water security in Mauritius • RAS: Water security and desalination plans adopted submitted (tbc) Baseline [2022]: no Baseline [2022]: no • Mauritius Renewable Energy Transition Target [2028]: Yes Target [2025]: Yes (FY24) Source: CWA’s reports Source: ASA report • Affordable Housing TA (FY24) 23 Objective 5 of the last CPF, Strengthened Management of Water Supply, was dropped at the PLR stage. 31 Indicator 4.2: Up-dated Renewable Energy SPI 4.2: Risk mitigation matrix, including proposed Potential new lending: Power Purchase Agreements adopted mitigation instruments, for competitively selected RE IPPs. • Mauritius Renewable Energy Transition Baseline [2022]: No Baseline [2023]: No (FY24) Target [2028]: Yes Target [2025]: Yes Source: Ministry of Energy and Public Utilities Source: Ministry of Energy and Public Utilities CPF objective 5: Building resilience to climate-related events The threat of climate change to Mauritius’ social and economic infrastructure and the wellbeing of its population has become more acute in recent years, thus increasing the importance of mitigation and adaptation measures. Strengthening policies and institutions for resilience against natural or man-made hazards and climate change has become a prerequisite for sustaining future growth. This is a modified objective from the previous CPF (introduced by the PLR).24 Rationale and World Bank Engagement: Mauritius is highly exposed to climate shocks with tropical cyclones, floods, and earthquakes being the most frequent hazards. Mauritius is also vulnerable to severe coastal erosion, coastal flooding, and storm surges as it relies heavily on its coastal zone for economic development with critical infrastructure and housing located on the coastline. The impacts of these hazards will worsen with climate change and sea-level rise. Understanding the fiscal and social impacts of climate risks and implementing measures to reduce and transfer these risks will be critical to enhance Mauritius’s climate resilience. As climate change continues to affect the frequency and severity of natural shocks , a robust disaster response system will be key to protect the populations and the economy. Lessons learned and new knowledge at the program level: A rapid assessment of disaster risk management systems and procedures in Mauritius has highlighted that significant progress has been achieved by the Government on vulnerability mapping, however impediments to achieving critical impact- based forecasting still exist. The Government is also challenged by an outdated overview of coastal erosion (status and trends) and of the most appropriate coastal engineering solutions. There is a need for a better understanding of the contingent liability of disasters for the Government, as well as country- specific building codes that address hazards, such as flooding and landslide risk, and energy efficiency. WBG ongoing and planned support to this CPF objective: Support from the WBG is expected to focus on (i) developing specifications for a disaster risk management (DRM) information system; (ii) reviewing the institutional arrangements for the provision of a flood early warning system and capacity building; and (iii) developing a national disaster public education strategy and DRM action plan. Support can also be provided to develop a next-generation coastal zone management masterplan, which would incorporate nature-based solutions and better support ministries of infrastructure, tourism, and others in their decision-making. The WBG may further work with the Government to conduct disaster risk management analytics that would allow the Government to better understand and quantify the fiscal impacts of disasters and climate change to help make the case for climate financing from donors and development partners and identify steps needed to protect the country better financially from external shocks. Key risks and mitigation: A catastrophic or high-impact event might happen earlier than expected, and WBG’s type of current support may be a mismatch to the magnitude of such an event. Such a risk can be mitigated through deeper dialogue with the Government on contingency planning for increased resilience. CPF Objective Indicators Supplementary Progress Indicators WBG Program Indicator 5.1: Implementation of impact-based SPI 5.1: Legal and institutional arrangements for Ongoing ASA: warning system developed for meteorological issuing hydrological warnings developed. • Africa Hydromet TA: Capacity Building and and hydrological hazards25 Baseline [2020]: No (No legislative provision) Knowledge Exchange Program Baseline [2022]: No (system in place) Target [2025]: Yes (Legislative provision made) Target [2028]: Yes Source: National Disaster Risk Reduction and Potential ASA: Management Center • RAS: Resilience (FY24) 24 The 2021 PLR introduced a new objective focusing on improving public sector capacity for planning and crisis response. 25 Sendai Framework Global Target G 32 Source: National Disaster Risk Reduction and Management Center SPI 5.2: Disaster management information Potential new lending: Indicator 5.2: Adoption of national disaster system developed to inform impact-based • Resilience (FY25) public education strategy and action plan warnings • Programmatic DPO (FY24; FY25) Baseline [2020]: No Baseline [2020]: No (system in place) Target [2028]: Yes Target [2025]: Yes Source: National Disaster Risk Reduction and Source: National Disaster Risk Reduction and Management Center Management Center CPF objective 6: Strengthening public financial management and planning While Mauritius generally has effective public institutions, a successful and more resilient recovery will demand reversing the recent trend of deterioration in the quality of macro-fiscal institutions, and a higher degree of policy coherence and coordination to strengthen planning, accelerate implementation, and maximize efficiency. The macroeconomic policies continue to present important medium-term challenges that are likely to be exacerbated by the recent changes in global food and oil prices, higher global interest rates, and the protracted recovery in tourist arrivals. This is a modified objective from the previous CPF.26 Rationale and World Bank Engagement: To improve public spending and support better development outcomes, strengthened macro-fiscal institutions, increased transparency, updated regulatory frameworks, and enhanced policy planning and coordination are needed. The recent weakening of macro- fiscal institutions has resulted in increased levels of perceived macroeconomic risk and rising contingent liabilities. The increasing use of off-budget instruments creates challenges for the effectiveness of the budget and medium-term financing framework for fiscal management. Procurement is cumbersome and slow, leading to delayed implementation of government programs and major infrastructure projects. Mauritius has created a Public Procurement Regulator and adopted e-Procurement early on, which provides a good basis for further support. At the implementation stage, performance- based monitoring, and evaluation is often nascent or nonexistent. The Government has made so far efforts to develop its monitoring function, focusing largely on financial monitoring, output monitoring of budget measures, and some monitoring in social sectors. However, a key missing link is the results-based monitoring of outcomes and rigorous evaluation of policy implementation that would create the ability to learn from implementation pitfalls and adjust course where needed. An enhanced focus on evidence-based policy making through better statistics and impact assessments of key Government initiatives is also needed. Lessons learned and new knowledge at the program level: The CEM identified key planning capacity gaps, such as limited alignment between budget allocations and defined development objectives; increased reliance on off-budget financial vehicles and parastatals for fiscal activities; and an M&E lacking a meaningful link to development objectives. The CEM recommended carrying out a second-generation reform for improving coordination and coherence across government agencies. The AfDB and the World Bank along with Procurement Policy Office have conducted an assessment of the public procurement system following the Methodology for Assessing Procurement Systems (MAPS), which lays out the reform roadmap for the future. WBG ongoing and planned support to this CPF objective: The WBG will look at the procedures and processes to increase alignment and provide support to the operationalization of the Project Implementation and Monitoring Agency as well as the Planning Bureau. Complementary support to Statistics Mauritius will help to facilitate evidence-based policy making, and the World Bank may also support assessing the effectiveness of key Government schemes and programs (for example, innovation, and cash transfer programs). Following the recommendations and the action plan of the MAPS report, the WBG will support (i) a review the Public Procurement Act to align with e-Procurement System including a set of regulations, guidance manual, and standard procurement documents; (ii) disclosure of bidding opportunities, contract awards including beneficial ownership in the public procurement portal following Open Contracting Data Standards to improve transparency and competition, and (iii) the integration of the compliant review system into e-PS and improvements in the effectiveness of the system to build trust and accountability. The World Bank can also provide TA and guidance/support to the government on formulating legislation on climate resilience investment management and green procurement by state-owned enterprises, which ensures adaptation and transition to a low-carbon economy. The World Bank will continue to undertake macroeconomic monitoring, which may be complemented by more frequent technical and high-level consultations with the authorities and support of medium-term fiscal consolidation efforts. 26 Objective 3 of the last CPF was Improved Public Sector Effectiveness for Planning and Crisis Response. 33 Key risks and mitigation: The Government has a track record of low utilization of reform advice. Hence three challenges need to be considered for providing advisory services for procurement reform: (i) identification at the preparation stage of all vested socio-economic interests in the status quo vs reform alternatives; (ii) capacity gaps with procurement reform implementation; and (iii) public preferences about the reform benefits (public vs private). These risks can be mitigated by providing implementation support, which also includes stakeholder analysis and political economy analysis, and through transparent access to information, clear communication, and professional training programs. CPF Objective Indicators Supplementary Progress Indicators WBG Program Indicator 6.1: Percentage of bidding SPI 6.1: Develop and pilot upgraded e-PS Ongoing ASA: opportunities and contract awards disclosed following increase in the number of procuring • TA to Planning Bureau through Chief Economists following Open Contracting Data Standards entities using e-Procurement of Government Presidential Fellowship initiative Baseline [2020]: 0 Baseline [2020]: 0 • Behavioral approaches to taxation and Target [2028]: 100% Target [2025]: 100% in 10 High spending experiment design with the Mauritius Revenue Source: e-PS Independent Review procuring entities Authority, TA (FY23) Source: e-PS Independent Review • Mauritius PER Potential new lending: • Programmatic DPO (FY24; FY25) Potential ASA: • RAS: Public procurement (FY24) • Statistical support for data analysis, TA, (FY23– FY27) 34 Annex 2: Mauritius (FY17–FY21) Completion and Learning Report Date of CPF: May 23, 2017 (Report No. 112232-MU) Date of Performance and Learning Review: August 31, 2021 (Report No. 112232-MU) Period Covered by the Completion and Learning Review: FY17–FY22 I. INTRODUCTION AND SUMMARY OF FINDINGS 1. This Completion and Learning Review (CLR) presents the World Bank Group (WBG)’s staff assessment of the performance of the Mauritius Country Partnership Framework (CPF) for FY17-FY21. The CPF was discussed by the Board on May 23, 2017 (Report No. 112232-MU). The CLR assesses and rates the overall effectiveness of WBG’s program in achieving its stated objectives, evaluates the WBG’s performance, and discusses the alignment of the CPF with WBG corporate priorities. The CLR assessment draws on discussions with WBG country team members involved in the delivery of lending and analytical work, a range of WBG documents and reports, and consultations with government counterparts and development partners. 2. The FY17-FY21 CPF was built around three Focus Areas: (i) Increasing Competitiveness; (ii) Fostering Inclusion; and (iii) Bolstering Resilience and Sustainability. It initially comprised six Objectives and nine indicators. The CPF supported the implementation of the Government’s Achieving Meaningful Change Program (2015-19)27 and was informed by the 2015 Systematic Country Diagnostic (SCD; June 25, 2015; Report No. 92703-MU). 3. A Performance and Learning Review (PLR) was endorsed by the Board of Executive Directors on August 31, 2021 (Report No. 112232-MU). Given changes in context since the start of the CPF, especially the COVID-19 shock and recession, the PLR provided an updated assessment of program performance, adjusted the World Bank’s engagement strategy to enhance the program’s relevance and effectiveness; and extended the CPF by one year through FY22.28 The PLR reduced the number of Objectives from six to four and the number of indicators from nine to seven, dropping Objectives where impact has been limited. One new Objective was added to strengthen anti-crisis response management. 4. The overall performance of the CPF program (FY17-FY21) is rated Satisfactory. The 2017-21 CPF had an ambitious objective – accelerating inclusive growth in Mauritius. The CPF aligned the WBG program objectives and interventions with Government’s priorities. The WBG delivered a robust portfolio of 13 Advisory Services and Analytics reports (ASA), supported by eight Reimbursable Advisory Services (RAS) agreements, mostly driven by client demand. Policy discussions were also funded through WBG own budget. Three out of four CPF Objectives were achieved, and one was partially achieved (see disaggregated ratings in Annex 1). 27 The Government’s program was further elaborated in the Economic Mission Statement of August 2015 and centered on 10 key strategies: (i) fostering a wave of modern entrepreneurs; (ii) creating more job opportunities for all; (iii) entering a new economic cycle focusing on innovation, boosting exports and private investments; (iv) moving towards a fully-fledged digital society; (v) fundamentally reforming business facilitation and expanding economic horizons; (vi) building the infrastructure that fits into the future; (vii) lifting the quality of life for one and all; (viii) addressing the root causes of poverty; (ix) launching a major public sector reform program; and (x) ensuring macroeconomic stability and sound public finances. 28 The World Bank COVID-19 Crisis Response Approach Paper recommended deferring the development of new CPFs until the return of steadier conditions. See The World Bank, “Saving Lives, Scaling-up Impact and Getting Back on Track,” COVID-19 Crisis Response Approach Paper, June 2020. 35 5. The WBG performance rating is Good. The ability to expand rapidly RAS delivery in Mauritius as an Upper-Middle Income Country (UMIC)/High-Income Country (HIC) partner was a key program feature of the CPF and allowed on-demand responsiveness to the Government's needs and requests. During the implementation period, the WBG forged a strong relationship with the Central Bank, the Economic Development Board, and the Ministry of Education. The risk ratings were accurately identified and mitigated. The CPF was adjusted at PLR stage to reflect changes in the policy and operating environment, including the waning public support in certain policy areas (e.g., pension and the water sectors reforms). The revised Focus Areas produced analytical products, recognized by the Government for their timeliness, and quality. II. PROGRESS TOWARDS CPF DEVELOPMENT OUTCOMES Country Context 6. Mauritius is an African success story. Today, Mauritius is an UMIC and a small state29 economy, with income per capita of US$8,627.80 (2020). Starting as a poor small island economy, the country faced many challenges such as a small domestic market, monocrop development, high risk and vulnerability to exogenous shocks and natural disasters. However, the Mauritius diversified towards textiles and developed robust industries in tourism, financial and information and business services.30 Choosing an equitable developmental path and sharing widely the gains from higher productivity and growth, Mauritius pulled most of the population out of poverty and created a large middle class. 7. Mauritius was a star performer in the early 2010s, when the country’s economic liberalization brought considerable diversification and export benefits, resulting in the country temporarily achieving HIC status in 2019. Following a period of sustained growth, Mauritius’ growth model started stuttering, in the years coinciding with the CPF period, due to structural constraints and stagnating capital productivity. Although the Government was projecting 5 percent growth per year, Mauritius only grew by 3.6 percent between 2016 and 2019. Growth was increasingly driven by consumption as the investment level declined while exports contracted. According to the 2022 SCD Update, export competitiveness dropped,31 public debt rose,32 while structural unemployment grew.33 An aging population and increasing friction in the labor market, resulted in rising inequality in labor income, high structural unemployment, inactivity, and skills shortages, coupled with the exclusion from economic opportunities of low educated women and youth. 8. Mauritius’ structural weaknesses, compounded by the Coronavirus Disease-2019 (COVID-19) pandemic, sent the economy into deep recession in 2020, and returned Mauritius to the Upper Middle- Income Country group in 2020. Mauritius delivered a highly successful health response to the global pandemic by enforcing an early strict lockdown and procuring sufficient vaccines. Nonetheless, the pandemic had a severe impact on Mauritius’ economy,34 leading to a 14.9 percent contraction in 2020 and aggravating country’s existing vulnerabilities. Mauritius’ current economic recovery path remains uncertain due to the continuing impact of COVID-19, including on tourism, exports, and public debt. 29 States with a population of 1.5 million or less. See Small States Forum, https://www.worldbank.org/en/country/smallstates/ overview#1] 30 World Bank Group. Mauritius: Through the Eye of a Perfect Storm – Coming Back Stronger from the COVID crisis. 2021. 31 Between 2009 and 2019, exports dropped from 57 to 40 percent of GDP. 32 Public debt increased from 62 percent of GDP at the beginning of FY2015/16 to 65.4 percent at the end of FY2018/19. 33 The unemployment rate among those aged 16 to 64 rose from 7.2 to 10.4 percent between the first quarter and December 2020. 34 Mauritius Macro and Poverty Outlook, October 6, 2021. In: https://www.worldbank.org/en/publication/macro-poverty- outlook/mpo_ssa, visited on February 17, 2022. 36 9. Mauritius is highly exposed to climate shocks.35 As other countries in the Southwest Indian basin, tropical cyclones and floods are the most frequent catastrophic hazards (tropical cyclones being the most common events). Mauritius estimated losses for a 1-in-50 and 1-in-100-year cyclone event are US$757 million and US$1.9 billion, respectively. CPF Outcomes 10. The CPF planned interventions only for the first two years of the implementation period, aiming to program the remaining part of the CPF cycle during the PLR in FY19. As Mauritius’ interest in borrowing from the WBG was uncertain during the preparation phase, the CPF built on the high value placed by the Government on RAS and ASAs. The CPF included a modest lending pipeline of two lending projects, one Development Policy Operation (DPO) and one Investment Project Financing (IPF), which did not materialize for different reasons (see further “CPF Implementation” section). 11. The PLR acknowledged the limited progress and prospects for the lending program, consolidated the CPF Objectives, and refocused the remaining part of the CPF engagement on delivering analytical advisory services. The Government was reluctant to consider new IBRD borrowing opportunities given the availability of domestic liquidity and access to grants and concessional financing. The PLR adjustments introduced a new Objective to address institutional capacity weaknesses and to strengthen the Government’s crisis response capacity. The revised program, adding selectivity considerations to increase program effectiveness, dropped the CPF Objectives where the engagement had stalled, and implementation had been off track (including on ocean economy, pension reform and water supply). The CPF was successful in achieving the remaining Objectives and indicators of the revised Results Framework (see Annexes 1 and 2). FOCUS AREA 1: INCREASING COMPETITIVENESS Objective 1: Improved Environment for Regional Trade & Investment - Achieved 12. The CPF contributed to the overall improvement of the business environment by removing a number of trade barriers and strengthening government capacity to formulate e-governance policies. ASAs supported Mauritius in key reforms aimed to help increase employment in higher value-added sectors. These sectors depend on increased trade and investment with Africa and were hampered by trade barriers. The WBG’s program sought to reduce tariff barriers within a multilateral program of coordinated trade policy reforms by providing budget support through the first regional DPO on Accelerated Program for Economic Integration (APEI). The program included ASAs and Technical Assistance (TA)36 aiming to improve the overall business environment. The program also included investments and advisory activities from the International Finance Corporation (IFC) and a guarantee from the Multilateral Investment Guarantee Agency (MIGA), which focused primarily on strengthening access to finance to Small-and- Medium Enterprises (SMEs) through local financial intermediaries. An essential part of this Objective was strengthening of the Information, Communication and Technology (ICT) sector as an important contributor to economic growth in Mauritius, as digital governance, supported by the Data Driven Development and ICT policy TA, has made trade-related requirements more accessible. 35 Mauritius. Disaster Risk Profile. The World Bank. 2017. https://www.gfdrr.org/sites/default/files/publication/drp_mauritius.pdf Global Facility for Disaster Reduction and Recovery. 36 Data Driven Development and ICT TA (FY17); Strengthening Regional Agriculture for APEI Countries for regional trade (FY19); Support for Mauritius-Africa Strategy Bilateral Program (FY19); Transforming Strategic Planning for Economic Development (FY21), and the ongoing TA on Insolvency, Secured Transactions and Doing Business Reforms RAS (P170028). 37 13. All three results indicators were met. The first indicator, related to the number of businesspeople entering Mauritius in 2019, was overachieved with 50,543 visits (against a target of 37,410).37 The second indicator was also overachieved, with 20 NTBs removed (against a target of 10 NTBs). By providing support to the Government for the drafting of a transparent and Open Government Data policy, the third indicator of building capacity to develop policies in digital governance was also met. As a result, the Government- wide Open Data initiative was established, and 75 officials were trained to ensure its sustainability. The Open Data Technical Assistance (2014-2016; P152729) supported the Government of Mauritius in adopting a good practice Open Data Policy, which states that non-sensitive and non-personal government data should by default be available to the public in machine-readable formats to strengthen transparency, accountability, informed policy decisions and economic value through new data-driven products and services.38 The Government adopted its Open Data Policy in May 2017 and launched its Open Data portal in April 2018 with 100 datasets (now 376 datasets).39 These positive outcomes were supported by Mauritius’ strong regional positioning as a champion for regional integration and active membership in several regional trading blocs, such as the Common Market for Eastern and Southern Africa (COMESA), the Southern Africa Development Community and the new African Continental Free Trade Area. FOCUS AREA 2: FOSTERING INCLUSION Objective 2: Increased Capacity to Implement Education Reforms - Achieved 14. With WBG’s support, the Government’s capacity to implement reforms for continuous basic education was strengthened in line with international good practices. The Government launched an ambitious and complex basic education reform in January 2017, ahead of WBG’s assistance, which started in September 2017. WBG developed a Technical Support for Implementation of Nine-Years Continuous Basic Education (NYCBE) Schooling Reform RAS (Education RAS - P162927) with the goal to strengthen capacity and provide technical expertise by bringing international good practice into four reform areas: school accountability; early support program and early digital learning program; extended curriculum; and professional teacher development. The Mauritius Academy for Teachers was set up to improve teacher skills and in-service teacher training. A new Quality Assurance Framework now guides school managers to improve the performance of their schools against explicit benchmarks. 15. These positive outcomes were also due to the strong complementarity of the Education RAS with other ASAs, such as the 2020 Youth and Women Inclusion and Using Data for Decision-Making (P171809) and the 2021 Transforming Strategic Planning for Economic Development RAS (P171558), which drew attention to skills development, inclusion of marginalized groups and unskilled women and youth. The 2021 Country Economic Memorandum (CEM, P171584) highlighted key remaining areas of education reform, both in higher skills development and inclusiveness. Finally, the Public Expenditure Review (PER) (P176975) under preparation (expected delivery end of 2022) is developing specific policy recommendations realigning Government education spending. 16. The Objective’s indicator was achieved. Adjustments to implementation were made based on actionable recommendations in response to evaluation findings and international good practice. The Education RAS outputs, including evaluations of the early learning and digital learning programs, were delivered on time, each of them produced through active engagement with Government counterparts. 37 https://statsmauritius.govmu.org/Pages/Statistics/By_Subject/Tourism/SB_Tourism.aspx See Table 8 under “Digest of International Travel & Tourism. Data for 2021 is not yet available. 38 https://operationsportal2.worldbank.org/wb/opsportal/ttw/about?projId=P152729 39 https://data.govmu.org/dkan/ 38 Mauritius shared experience on education reform with African partners, including through (pre- pandemic) study visits, most recently from Lesotho. 17. The technical support under the RAS program contributed to the design and implementation of the Government’s Nine Years of Continuous Basic Education (NYCBE) reform. One of the four specific outcomes of the RAS was strengthening school accountability through supporting the Government’s effort to establish the Mauritian School Academies and designing a new governance model for excellence in the Regional State Secondary Schools (RSSSs).40 The main message of the paper prepared by the World Bank for the RSSSs, was the need to move from the current compliance model to an accountability-cum- autonomy model. The paper contributed to the dialogue on how to strengthen school accountability. 18. Informed by the Education RAS, the Government introduced reforms that fostered further inclusion and equality of education by abolishing a pre-vocational track in Grades 7-9 and providing additional support to lagging students. The NYCBE reform has ushered in striking changes, among them the abolition of the prevocational track in Grades 7-9, so that all children now follow the same curriculum in their first nine years of basic education and additional new support programs for lagging students. However, further progress is required in the areas of early childhood development, lagging schools and educators, and educational technology to improve teaching and learning (World Bank, 2021) to address the root causes of wide disparities in learning outcomes. FOCUS AREA 3: BOLSTERING RESILIENCE AND SUSTAINABILITY Objective 3: Improved Public Sector Effectiveness for Planning and Crisis Response - Partially Achieved (in progress) 19. The WBG support under Objective 3 aimed to assist the Government with next generation reforms, despite its high institutional quality and effectiveness, to unlock key reforms for enhancing policy coherence and planning capacity for complex multi-stakeholder implementation and Monitoring and Evaluation (M&E). It will also increase the government’s capacity to confront key challenges, such as recovery from the COVID-19 pandemic and natural disasters (such as cyclones and flooding) and climate change adaptation. The main inputs to this objective were the 2021 CEM and 2022 PER. The CEM identified key planning capacity gaps, such as the Government’s inability to align budget allocations to clearly defined development objectives; increased reliance on off-budget financial vehicles and parastatals for fiscal activities; and an M&E lacking a meaningful link to development objectives. The CEM recommended carrying a second-generation reform for improving the coordination and coherence across government agencies. A cross-cutting focus is placed on working closely with the Ministry of Finance and Economic Development’s Economic Planning and Development, especially the newly created Planning and Research Bureau, for aligning expenditure to priority objectives and monitor the impact of public spending at the outcome level. The Data Driven Development and ICT Policy TA (P161878) and the Transforming Strategic Planning for Economic Development RAS (P171558) also contributed to this Objective. 20. The PER will provide evidence on opportunities for more efficient use of public resources during the critical phase of recovery and fiscal consolidation following the enormous impact of the COVID-19 pandemic on the Mauritian economy. This will support fiscal consolidation while strengthening the effectiveness of public interventions to support economic recovery, investment in new growth sectors, social inclusion, and education. It will contribute to the Government’s readiness to respond to shocks, 40 Mauritius Education RAS (P162927), Activity Completion Summary (ACS), September 24, 2020. See also Technical Report on a New Governance model for Mauritius Regional State Secondary Schools. 39 including natural disasters. The delivery of the PER is expected by September 2022. The budget reflecting the inputs from the Bureau for Strategic Analysis and Planning is evidenced by a TA provided by the World Bank to the Bureau under the mandate of the Economic Development Board (EDB) created by the EDB Act, in December 2017. The EDB provides high-level strategic and policy advice to Government on economic policy formulation. 21. Other RAS products were associated with the scope of this Objective, although not included in its results chain. The Review of the Sugar Cane Sector RAS (P171987)41 provided policy advice on reforms to the sugar cane sector. Based on the report, the Government made changes in its approach for purchasing energy from the sugar cane industry, adjusting upwards the price paid for bagasse (byproduct of sugar production). Second, the Productivity Study and Report RAS (P173238) took stock of the country's recent productivity trends and put forward specific policy recommendations to boost productivity growth in the future.42 Objective 4: Build Capacity to Implement Strengthened Financial Sector Governance – Achieved 22. Both indicators for Objective 4 have been achieved. In 2022, the Bank of Mauritius (BoM) migrated to a forward-looking risk sensitive supervisory approach for the banking system.43 The Government adopted payment regulations to facilitate access to new financial products and services for households and small business retailers, including mobile money. Further, through the 2016 Financial Sector Assessment Program (FSAP) TA (P160871), the WBG supported the Central Bank on the payments law, regulations were successfully adopted to facilitate access to new financial products and services for households, as well as small businesses and retailers, including mobile money.44 23. WBG assistance helped the Government put in place stronger regulatory and supervisory arrangements and frameworks to manage system-wide stress and ensure continued financial sector resilience. Through the Mauritius Money Laundering and Terrorism Financing Risks Assessment RAS (P162592) and the Enhancing Supervisory Capacity of the Bank of Mauritius (P165248), the WBG provided support for improving the capacity of risk-based prudential and AML supervision of the banking sector. The WBG’s advisory also supported the development of virtual assets legislation that consolidates the jurisdiction’s Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) regime. In addition, the RAS developed various modules addressing all categories of banking risks – credit-, liquidity, market-, operational-, AML-, capital adequacy-, and governance risk. Methodology for all modules has been developed and pilots have been carried out for the evaluation and mitigation of credit-, liquidity-, and AML risks, for which user manuals have also been developed. 24. The removal of Mauritius from the FATF 'grey list' in October 2021 re-established the credibility of its jurisdiction as a domicile of choice for structuring cross border investment into Africa and Asia. In 2020, Mauritius was found not to be in compliance with the Financial Action Task Force (FATF) and EU’s 41 Mauritius Sugar Cane Review Policy Note. December 19, 2020. Report No: AUS0001937 42 Some of these recommendations included: (i) to continue to drive productivity growth, focus should be paid on opening cross- sectoral support linkages, supporting broad investment in education programs that prepare people for work, as well as fostering outward orientation across all sectors in the economy; (ii) the country’s services and manufacturing sectors should look to increase research and development spending, bring new products, and Services to the market, and to invest in capital accumulation. Mauritius Productivity Study Report 2020/2021. June 8, 2021. Report No: AUS0002323 43 WBG supported the implementation of the migration through the RAS on Enhancing Supervisory Capacity of the Bank of Mauritius (P165248), since January 2018. The RAS includes, inter alia, provision of technical support to Client to revise its current supervisory methodology to establish a risk-based supervision (RBS) methodology that enables the performance of a comprehensive qualitative and quantitative risks assessment of licensed banks; their risk management frameworks and practices; and their governance and oversight frameworks, through a combination of offsite and on-site processes. 44 The World Bank did not contribute directly to the establishment of the National Payments Act system. However, the FSAP made recommendations and provided comments on the law without engaging further. 40 global anti-tax and AML initiatives. Mauritius was placed on the ‘grey list’ for increased monitoring by the FATF. Mauritius was also added to the European Union’s AML blacklist for third countries high-risk. This eroded Mauritius’s position as a leading investment destination. Mauritius was subsequently upgraded on several FATF Recommendations making it 'Compliant' or 'Largely Compliant' with 39 out of the 40 FATF Recommendations. While the WBG’s advisory services didn’t directly contribute to the removal of Mauritius from FATF’s grey list, it contributed to the strengthening of the country’s ability to effectively regulate the financial sector and built capacity on AML issues through the National Risk Assessment process. III. WORLD BANK GROUP PERFORMANCE 25. The WBG performance is rated as Good. The design and implementation of the CPF program successfully contributed to the pursuit and achievement of CPS. Aiming to support the Government in accelerating inclusive growth in Mauritius, CPF design and implementation aligned the WBG program objectives and interventions with government programs under a result framework with flexible and open- ended design. Adjusted at PLR stage to reflect changes in client demand, policy, and operating environment, the Focused Areas delivered high-quality analytical products. CPF Design 26. The CPF design was relevant to Mauritius’ development challenges; it was anchored in the Government’s program and strategic initiatives and the priorities identified in the 2015 SCD. A key focus of the CPF design, including its strategic priorities, was to ensure a strong partnership between the WBG and with the Government, as Mauritius pursued its HIC aspirations. The WBG and the Government agreed to focus the CPF program on a limited set of objectives, supporting Government's priorities. This focused engagement led to a significant reduction in the number of CPF objectives – from 22 during the 2007 CPF to six objectives in the 2017 CPF, and to four objectives in the 2021 PLR. These adjustments were prompted by dropping non-performing objectives, and by strengthening selectivity considerations to increase program effectiveness. The CPF program needed to introduce a new objective to address institutional capacity constraints of the Government anti-crisis response during the pandemic. 27. The 2015 SCD identified 18 priorities to address three binding constraints: inadequate labor skills, imitated technology absorption, and inadequate trade facilitation. In response to the SCD, the CPF focused on three areas: (1) competitiveness; (2) inclusion; and (3) resilience. These higher-level objectives were aligned with Mauritius’ strategic interest in liberalizing and expanding regional trade, offsetting the negative impact of reduced preferential trade access. Despite Mauritius’ business regulatory environment being the best in Africa, the CPF aimed to unlock further Mauritius potential through reforming underperforming areas and stimulating investment. 28. The choice of instruments at design stage matched Mauritius’ needs for high quality analytical and advisory products, and the Government’s focus on deepening regional trade and integration. The WBG supported Mauritius through advice and analysis needed to design or implement better policies, strengthen institutions, build capacity, inform development strategies or operations, and contribute to the global development agenda. Some of this work was financed by the World Bank’s own resources (ASAs), while RASes financed products primarily requested by the Government. The RASes, by and large, responded to well defined and specific client needs and, in most cases, had a direct impact on addressing them. The World Bank funded ASA work was often more intended to fill in knowledge gaps, engage in advocacy and influence the policy discourse. A DPO series was considered to accelerate regional 41 integration and foreign direct investment (FDI) by supporting trade reforms. IPFs were planned to finance region-wide investments, reflecting the Government’s debt reduction goals and available excess liquidity. 29. The WBG design offered a great deal of flexibility aiming to ensure responsiveness during changing external circumstances. As a result, the implementation of the CPF was left with some programming uncertainty. The CPF purposedly focused only on the first years of implementation, leaving the second half of the CPF period to be defined at PLR stage. The flexible CPF design was meant to allow for adaptive learning and feedback from the first two-year implementation. Flexibility also meant that adjustments to the program could be made based on the emerging and changing Government priorities – an important consideration when working with countries that have a large RAS base. Initially the PLR was planned for FY19 to provide adjustments for the remaining part of the CPF cycle, also allowing IFC and MIGA to take stock of their programs. However, because of the COVID-19 pandemic and the time needed for the Government to refocus its priorities, the PLR exercise was postponed until 2021. 30. At CPF design stage, the World Bank was aware of the risks of pending reforms and especially with the mixed record of the protracted pension and water reforms. The WBG was mindful that such complex reforms will require mid-to-longer-term timeframe, and that these were the high risk /high pay- off stakes in the CPF design, vulnerable to changing public sentiment and changing political will. An important design lessons from these aborted attempts for the next CPF are: (i) avid personalization of the reform effort (water reform) can backfire; and (ii) high risk/high reward reform items should only be considered after strong political commitment is evident, backed-up by broader public consent. 31. The ex-ante risks and mitigation measures were adequately identified; the COVID-19 pandemic elevated several risks , including the overall risk rating to the program implementation. Two key risks initially rated as moderate – macroeconomic risk and institutional capacity – deteriorated and were upgraded to substantial at PLR stage. COVID-19 drove up Central Bank financing and Government’s fiscal expansion, increasing debt levels and contingent liabilities. The Institutional capacity risk was underestimated at design stage, and this became apparent with the challenges in ensuring full Government coordination in the face of the increased complexity of pending reforms, such as the reform of social support programs, design of PPPs, natural resources management, or climate change adaptation. The PLR adjusted the overall risk rating from low to moderate. The PLR considered adequate risk mitigation measures, such as renewed attention to policy coherence and implementation capacity and introduced a new CPF Objective on Improved Public Sector Effectiveness for Planning and Crisis Response. 32. IFC investments and advisory services complemented the emerging demand and opportunities for Mauritian firms’ outward investments in Africa. From the outset, non-lending TA was expected to focus on developing diagnostics and sharing international good practices for fisheries and aquaculture, port development and logistics, renewable energy, and environmental protection. The TA was to be applied to capacity development objectives, such as development of implementation plans for education reform and moderating risks related to implementation. Grants from the Global Environment Facility were expected to complement the regional DPO, while Trust Funds (TFs) were to support RAS activities. 33. The CPF assumed active IFC and MIGA roles to selectively support several objectives. IFC priorities were consolidated around mobilizing private investments for infrastructure, light manufacturing (textiles and medical devices), agribusiness, tourism, and financial services; private sector access to finance (with a strong focus on MSMEs); and promoting greater regional integration through increased investments by Mauritian firms in the Africa region. However, due to the impact of the COVID-19 crisis during the second half of the CPF period, IFC refocused its efforts to prioritize crisis management and maximize the use of 42 the IFC COVID-19 facility and emergency support to local clients. This included IFC support to repurposing light manufacturing operations to better serve the health sector (e.g., local production of masks) in alignment with the Government’s strategy to foster the emergence of innovative, sustainable, and globally competitive SMEs. By integrating IFC support across all three initial Focus Areas, IFC advisory services and investments contributed to outcomes in three out of the initial six strategic Objectives. MIGA aimed to mobilize FDI through its political risk guarantee instruments, supporting access to finance for Mauritian SMEs, corporates, and project finance clients. 34. The WBG sought collaboration with other development partners as an essential part for the CPF implementation, especially around knowledge and advisory work. The WBG has been a member of the partner coordination mechanism, moderated by the United Nations (UN) resident office. The WBG actively leveraged partnerships with International Monetary Fund, UN agencies and development partners with presence in Mauritius, such as the European Union Delegation, the French Development Agency (Agence française the développement-AFD) and the United States Agency for International Development, for example on climate and disaster risk management, and countering the social impact of COVID-19. The collaboration with IMF has been especially important during the pandemic period and the Government unorthodox response measures. Although less critical, the relationship with the AfDB and regional communities where Mauritius is active (SADC, APEI, IOC) have informed the WBG dialogue with the Government on overlapping activities in such areas as disaster preparedness, fisheries, regional transportation, and digital economy. 35. Lessons from the previous cycle informed adjustments in the FY17-21 CPF program design. Policy- based lending was considered as preferred instrument in supporting the Government’s reform program. However, the Government increasingly valued TAs, analytics, and policy dialogue more than financing, to what the WBG responded with developing a pipeline of ASA and RAS products. Close engagement with the Government was particularly important to respond to evolving priorities and to maintain WBG’s implementation flexibility and relevance. As recommended, the FY17-21 CPF adopted a more focused and realistic results matrix. The CPF also moved away from pursuing a joint strategy among development partners, which was deemed ineffective by the 2016 CLR. The critical lessons from the PLR45 came too late in the CPF cycle to have direct learning effect on the remaining time of the program implementation; however, these informed the CLR assessment and lessons learned (see below Section V). 36. Important lessons regarding WBG realism were drawn from the implementation of APEI first DPO.46 The overly ambitious design of the DPO series severely limited project impact and resulted in limited outcomes. The World Bank had chosen a programmatic DPO series to be coordinated across five countries47 to support regional reforms as collective action. The first operation was designed with focus on immediate reforms; while the second – on the mid-term reform agenda. This required sequencing over time of a heavy policy agenda across countries with obvious cyclical and structural differences. The preparation team also did not draw on lessons learned from regional approaches elsewhere (e.g., EU). The use of a DPO approach, also without considering modality alternatives to achieve the same objectives, limited severely five countries’ participation due to difficulty of meeting readiness criteria regarding macroeconomic adequacy. This reduced the scope of the operation, and ultimately led to cancellation of 45 The PLR identified three key lessons: (i) absence of a lending program as limitation to the World Bank’s convening power; (ii) RAS effectiveness proven primarily in well-defined reform areas with implementation support needs; and (iii) balancing client demand with ‘big picture’ corporate priorities. (2021 PLR, paras 39-41). 46 The PDO of the first DPOs (2016, US$20.3 million) from the programmatic series was to improve the policy environment for trade in APEI countries by removing barriers to trade in goods, promoting trade in services, and enhance trade facilitation. 47 Malawi, Mauritius, Mozambique, Seychelles, and Zambia. 43 the follow-up operation, dashing the potential gains for Mauritius (and eventually further borrowing appetite) compared to an option, where it could have gone for one country DPO design. CPF Implementation 37. Notable positive results have emerged across the two focus areas. For example, barriers to trade were removed, enhancing regional integration efforts. The Education RAS contributed to the implementation of important reforms in the education sector, such as the abolishment of the pre- vocational track in Grades 7-9; the establishment of Mauritius Academy of Teachers; M&E of the Early Support Program (ESP) and the Early Digital Learning Program (EDLP), which were supporting students in Grades 1 and 2, among other things. In addition, recently announced legal changes will further advance doing business reforms; and supervision of the banking sector is increasingly risk-based. Finally, the 2021 Review of the Sugar Cane Sector RAS (P171987) guided the Government in its approach for purchasing energy from the sugar cane industry, adjusting upwards the price paid for bagasse (byproduct of sugar production). 38. However, by the mid-point of the CPF implementation (2019), the CPF faced difficulties due to the changing focus of the local political agendas, and the stalled progress of three CPF Objectives. First, under the Objective “Strengthen Government Capacity to Development Policy Options to Increase the Sustainability of Pensions Program,” the WBG provided technical assistance to the Government in considering different pension reform options. The main options focused on gradually raising the retirement age in line with increases in life expectancy, focusing the second promised increase in pensions on those who were poor, rather than providing universally; and indexing the pension increases going forward to inflation to protect the pensioner’s cost of living. In June 2020 budget speech, the Government announced capped increases in the Basic Retirement Pension, which remains at the age of 60; introduction of new Contribution Sociale Generalisée (Generalized Social Contribution) that starts at the age of 65; and provision of unspecified universal benefit to those above 65, including to the non- contributors; and abolishment of the contributory pension system for private sector workers. Secondly, under the Objective “Build the Knowledge Base for Unlocking the Potential of the Ocean Economy,“ the ASA on the future of the Blue Economy did not generate the intended traction for policy reforms or investment projects. The blue economy portfolio remained scattered across institutions and key stakeholders found Bank’s ASA lacking specificity to inform policy action. Finally, under the Objective “Strengthen Management of Water Supply,“ the main reforms envisioned for the water sector - increasing efficiency and reducing waste through price reforms and introduction of a PPP contract between the Central Water Authority (CWA) and a private operator - met strong political resistance and lost traction ahead of November 2019 elections. In early 2020, the discussions on water sector reforms were overshadowed by the outbreak of COVID-19; the minister who championed the sector reform left office. 39. The adverse impact of the COVID-19 pandemic on the conditions and the results of the CPF program implementation was significant. The pandemic was a factor, together with the 2019 elections, to postpone the PLR to FY21, originally intended for FY19, defer the preparation of the new CPF48 by extending the CPF period through FY22. Although the original objectives (competitiveness, inclusion, and resilience) remained relevant, the PLR acknowledged the mixed implementation progress to be a result of the economic and social shocks caused by COVID-19 pandemic and the lockdown. The Government requested a budget support operation for COVID-19 response, which the World Bank dropped during 48 This was in line with the recommendations of WBG COVID-19 Crisis Response Approach Paper to defer the development of new CPFs until steadier conditions. 44 preparation due to Central Bank’s unorthodox anti-crisis financing practices.49 IFC responded to COVID- 19 pandemic providing advisory services for developing Mauritius-based manufacturing capacity for personal protective medical devices. 40. COVID-19 shock reversed progress in some areas and weakened World Bank’s overall effectiveness; however, provided valuable PLR and CLR lessons. The COVID-19 pandemic put under strain the progress made in the pre-pandemic period on halting inequality threatening some of the pre- pandemic achievements, including on poverty, labor market integration of low-skilled youth and women, and education. The impact of pandemic, together with the electoral commitments for universal pension increases, constrained the effectiveness of the social protection measures during the pandemic. Obviously, the Government found it difficult to pursue structural and tariff reforms amidst the pandemic recession. Mainly for these reasons, in addition to the strong electoral resistance before the pandemic, the water sector reform stalled and was dropped as a CPF Objective. One important lesson made considering the related structural challenges caused by the COVID-19 shock has been the need to build capacity for planning crisis response. As a result, a PER was added to the program and launched in FY21 under a new CPF objective to strengthen institutional capacity issues and Government’s crisis response. 41. The comprehensive and demand-driven ASA portfolio helped foster good client relationships and delivered on quality and expectations. The CPF program initially planned 10 ASAs, three of which were RASes. However, the advisory program under the CPF expanded to one IPF (Mauritius Statistical Capacity Building Project50), 13 ASAs, and eight RASes (see Table 1 below and Annex 3 (b)). The ASA/RAS program became the main driver of the WBG relationship in Mauritius. The total value of signed RAS agreements reached US$5.23 million by FY22. The WBG also supported advocacy for WBG institutional priorities, such as gender and equity, notably through the Youth and Women Inclusion and Using Data for Decision- Making ASA (P171809). The Transforming Strategic Planning for Economic Development RAS (P171558) drew attention to skills development, inclusion of marginalized groups and unskilled women and youth. However, some of the Government’s RAS requests, like the Review of the Sugar Cane Sector RAS (P171987), which came out of the ongoing dialogue with the Government, reflected more Government emerging priorities than established outcome objectives. Table 1. 2017 CPF RAS Program FY Agreement Task Name Lead GP Delivery Amount ($US) Support to Potable Water Sector Reform 2017 Water 375,000 Money Laundering Terrorism Financing Risks Assessment 2019 FCI 205,463 Education 2020 Education 985,000 Insolvency, secured transactions and doing business reforms 2022 FCI 1,070,000 Transforming Strategic Planning for Economic Development 2021 Governance 1,001,315 Review of the Sugar Cane Sector 2020 Agriculture 410,000 Productivity Study and Report 2021 FCI 169,745 Enhancing Supervisory Capacity of BoM 2023 FCI 1,018,417 5,234,940 42. The modest CPF lending program that included two projects, did not materialize. The indicative lending pipeline included a second regional DPO to support the regional Accelerated Program for 49 The World Bank dropped its US$100 million IBRD co-financing portion of the budget support loan being prepared together with AFD. AFD proceeded with a EUR300 million Cat-DDO loan which the WBG also did not support due to concerns regarding the financing risk, as elaborated in paragraph 46-vi-a. 50 Funded by RETF. 45 Economic Integration (APEI; P155442; US$15 million) ;51 and a US$10 million IPF for the Southwest Indian Ocean Regional Fisheries/Blue Economy Investment project (SWIOFish). Despite Mauritius eligibility, the second regional DPO was dropped due to inadequate macro-fiscal prerequisites for several of the participating countries.52 The proposed US$10 million SWIOFish IPF was dropped due to the Government’s declining interest in borrowing from the WBG. However, a Small Grant of US$350,000 from the Statistical Capacity Building TF financed the Mauritius Statistical Capacity Building Project (P163248),53 helped strengthen the capacity of Statistics Mauritius to collect a comprehensive set of household data, supported and strengthened the analytical capacity of Statistics Mauritius, and enhanced statistical data production and dissemination practices. 43. The WBG provided prompt responses to the changing external circumstances. As noted, due to COVID-19 pandemic, the PLR originally intended for FY19 was conducted in 2021. The deferred PLR allowed to account better for the impact of the pandemic on the program. However, late in the cycle, the adjusted Objectives could only make incremental adjustments, with limited effect on the higher-level outcomes. Nonetheless, 2021 CEM identified areas of policy incoherence and lack of implementation and planning capacity that contributed to slow implementation progress, which the WBG and the Government agreed to address in the revised and scaled-down program of the PLR. Besides the added new CPF Objective to improve Government planning capacity and anti-crisis, PLR’s main adjustments included dropping three poorly performing objectives. The changes reflected the areas of established relationship with the Government, as well as WBG’s ability to attract strong technical teams that brought the needed global expertise. 44. During the implementation of the CPF, the close collaboration within the WBG grew and was critical for improving policy dialogue. The collaboration between the WB and IFC was generally effective and helped open new entry points for engagement, such as cluster and regional approach for strengthening Mauritius’ textile sector. In addition, a close WB-IFC collaboration was established around key analytical work supporting the private sector development agenda. This included the work on the CEM and the CPSD. During FY20, IFC committed a total of US$37.5 million to Bank One to strengthen the Bank’s long-term funding position and support the expansion of its lending operations to SMEs. IFC also invested in a private equity fund (current exposure of US$3.5 million). At the PLR stage, IFC’s adjustments included broadening the scope beyond Ocean Economy of the dropped (old) second Objective.54 45. MIGA continues to support Mauritius’ financial sector to provide needed financing to SMEs. MIGA issued a capital optimization guarantee to ABSA Group of South Africa (ABSA) for US$94 million against the risk of expropriation of mandatory reserves which its subsidiary in Mauritius holds with the Central Bank. The transaction enabled ABSA’s Mauritian subsidiary to have more headroom to lend to Mauritian’s SMEs, corporates, and project finance clients. In addition, Mauritius (as a member of COMESA) is eligible to benefit from a MIGA guarantee, covering a total of US$405 million equivalent in loans to Eastern and Southern African Trade and Development Bank (TDB), which supports the expansion of TDB’s trade finance portfolio throughout the COMESA region. Under this project, the lenders, supported by a MIGA 51 First Regional Accelerated Program for Economic Integration (APEI) DPO. March 11, 2016. Report No. 80628-AFR. APEI was a multilateral initiative designed to: (i) remove barriers to trade in goods, (ii) promote trade in services, (iii) enhance measures to facilitate trade, and (iv) improve the business environment. APEI included five members: Malawi, Mauritius, Mozambique, Seychelles, and Zambia. The DPO closed on March 31, 2017. 52 Of the five APEI members, only Mauritius and Seychelles met the adequacy criteria for the second APEI operation. Seychelles chose not to participate, so the loan was canceled in 2018. 53 IPF Small Grant provided for US$0.35 million for the Mauritius Statistical Capacity Building Project (P163248), financed from the Statistical Capacity Building TF. Approved on March 16, 2017. Closed on March 21, 2020. 54 One new indicator was introduced to capture the private sector investment in non-real estate sectors and maximizing the utilization of the IFC COVID-19 facility. 46 guarantee, extended a EUR50 million loan facility to TDB earmarked for on-lending for COVID-19 response activities. 46. One of the main lessons from IFC’s engagement was that in HICs, like Mauritius, financing instruments available to IFC to support the private sector were limited. In such context, IFC could better play a countercyclical role by stimulating market creation and private sector activity, including through mobilization of other financiers. In the next CPF cycle, IFC’s medium-term focus targets could include: (i) capital market development and financial product diversification, including further exploring the digitalization of the financial sector to foster financial inclusion as part of COVID-19 crisis response; (ii) promoting climate change initiatives and ways in which Mauritius could move from fossil fuels into more renewable and alternative fuel sources including Liquid Natural Gas (LNG) imports, and share lessons learned from other geographies on waste-to-energy projects and explore providing financing under PPP; (iii) infrastructure development through Private Public Partnerships (PPPs) and; (iv) support of a regional approach for light manufacturing, in tandem with Madagascar. IV. ALIGNMENT WITH CORPORATE GOALS 47. The CPF was aligned with the WBG Twin Goals of ending extreme poverty and boosting shared prosperity in a sustainable and inclusive manner. To support Mauritius’ progress toward the WBG Twin Goals, the CPF design and implementation addressed several corporate priorities, including: i. Institutions Strengthening. Institutional quality, financial sector governance, and public sector effectiveness remain very important for maturing Mauritius UMIC/HIC profile. Institutional weaknesses became apparent in light of Mauritius’ increasing structural challenges, especially during unforeseen crises such as the COVID-19 pandemic. With a small package of advisory and TA deliverables,55 the WBG supported the Government’s successful effort to be removed from the Financial Action Task Force (FATF) and EU lists for Anti-Money Laundering/Combatting the Financing of Terrorism (AML/CFT), thus assisting Mauritius to sustain investor’s (including offshore) trust and confidence in its financial institutions. ii. Jobs and Economic Transformation (JET). The WBG provided support to PPP priorities through the Potable Water Sector PPP and Reform RAS (P164368) and the Support to Potable Water Sector Reform and PPP for the National Water Authority ASA (P158935). The JET agenda was the focus of the initially planned APEI and SWIOFish projects. The Review of the Sugar Cane Sector RAS (P171987) addressed labor market constraints and providing more opportunities for the youth. The Productivity Study RAS (P173238) looked at job creation and employment growth through the lens of firm-level productivity, business environment, and skills. iii. Gender and Development. As Mauritius has high female secondary school enrollment (over 95 percent),56 the CPF focused on addressing gender differences in the labor market, more specifically on aligning wages, and eliminating the gender gap in male-dominated jobs, such as fisheries, the blue economy, and the sugar cane sector. The CEM looked at exclusionary practices against women as constraints to increased investment, as well as on existing skills- and gender distortions of the labor market. iv. Climate Change and Resilience. 55 These included Money Laundering and Terrorism Financing Risks Assessment (P162592); Enhancing Supervisory Capacity of BoM RAS (P165248) (ongoing); TA on Insolvency, Secured Transactions and Doing Business Reforms RAS (P170028). 56 See Human Capital Index data. 47 a. Mauritius is highly exposed to climate shocks. Under the Regional Programmatic ASA “Strengthening Climate and Disaster Risk Management in Sub-Saharan Africa (P150835),” a Risk Assessment was conducted for the Island states in the South-West Indian Ocean (SWIO). The assessment covered Mauritius and included the development of new hazard, exposure models and catastrophe risk loss assessment.57 Discussions were underway between the WBG and the Government for the support of Mauritius’ emergency management and climate resilience, in collaboration with AFD. In 2019, a Disaster Risk Management Assessment was conducted and contingency financing for disasters through a DPO with Catastrophe Deferred Drawdown Option (Cat DDO) co-financed by the WBG and AFD was considered. Cat DDOs offered rapid liquidity in the event of a disaster or health emergency and was to provide a TA on climate resilience and emergency management. The WBG dropped the Cat-DDO during preparation, due to macro-framework concerns, after the Bank of Mauritius (BoM) transferred exceptional nonrefundable Central Bank resources, amounting to about 13 percent of the GDP to the fiscal account, thus weakening BoM’s balance sheet, and exposing the Central Bank to significant contingent liabilities and commercial risks. b. Reaching and maintaining HIC status requires building resilience and sustainability, upgrading infrastructure and improving natural resources management (land, water, coastal and ocean ecosystems). In this regard, the Review of the Sugar Cane RAS (P171987) addressed the negative effects of climate change on the sectors. In addition, recommendations from the Support to Potable Water Sector Reform RAS and PPP for the National Water Authority (P158935) could have contributed to better water management and climate change resilience.58 V. LESSONS LEARNED 48. The design and implementation of the 2017-21 CPF provides important lessons to inform the preparation of the next CPF. These are derived from the results of the FY17-21 CPF program, consultations with the Government and stakeholders and interviews with WGB staff. Several of the PLR lessons remain relevant and are incorporated in the list below. Tasks specific conclusions are provided in Annex 2. 49. It is important that the WBG program design remains demand-driven, with high degree of flexibility to respond to changing priorities and circumstances. The WBG is perceived both as a development partner/policy adviser and as a technical partner implementing advisory products. While a flexible design has proven to be a good approach in a UMI/HIC country like Mauritius, it still needs be grounded in coherent higher-level priorities and agreed scope of work under each priority areas. For the next CPF cycle, the flexibility of the program will be better exercised by holding regular validations with the Government during the entire CPF implementation period to assess progress, identify and address bottlenecks, enhance outcome-orientation, and update the program. 50. With the growing importance of RASes, the WBG effectiveness will depend on clear selectivity criteria, agreed with Government. Expectations about what the ASAs and RASes can achieve should be discussed and agreed at concept stage. The Government and stakeholders should be closely associated during the development stage to ensure alignment with outcomes. The next CPF should take into account 57 The assessment found that Mauritius experiences over US$110 million annually in combined direct loss (0.8 percent of per capita domestic product-GDP); and estimated that each year, there is a 1 percent chance of losses exceeding US$1.9 billion (13 percent of GDP). 58 The APEI and SWIOfish also aimed to respond to Climate Change and Resilience challenges but were dropped. 48 candid considerations about political economy as well as feasibility and sustainability of desired outcomes, objectives and targets. During the CPF preparation stage, the WBG and the Government shall agree upfront on how the program shall be funded, and which tasks shall be covered by the WBG budget, and which by the Government; and how the results would be utilized, especially for core ASAs and other products, so that the Government receives the best outcome. 51. ASAs and RASes, are effective instruments, especially when focused on implementation support to specific reform efforts. Identifying such areas requires realism during the design phase, as well as thorough consultations with various stakeholders, including Development Partners and civil society. Effective ASA/RAS preparation needs regular communication. A good practice in this regard has been the Education RAS (P162927), developing clear terms of reference for each set of deliverables; and continuous communication with counterpart teams to keep the work on track throughout the lifetime of the RAS. The FSAP Follow-up TA (P160871), financed out of BB, was also a good practice, as while delivering the TA, it became clear that continuous engagement on policy dialogue, even in the absence of a lending program, could lead to successful reforms. Attention should be paid to the implementation modalities, including agreeing on dissemination plans using policy notes or other knowledge products to increase use and reach various audiences. The technical quality of the FY17 report “Ocean Economy in Mauritius: Making it Happen” was sound, but stakeholders deemed it too complex and abstract. As a result, the Government used the Report to inform strategy formulation; however, the Report did not generate further traction for implementation of key reforms. The next CPF design shall strengthen the link between the planned ASAs/RASes upstream and opportunities for mobilizing financing downstream, including public-private financing, PCM, and informing options for sustainable bond issuance. 52. The WBG and the Government will strengthen the dissemination of important ASAs’ findings. WBG knowledge is appreciated by the Government, development partners and the private sector, for filling in knowledge gaps, consultations and advocacy and providing core diagnostic services. The most successful interventions included layers of consultations and dissemination. For example, the Review of the Sugar Cane Sector RAS (P171987)59 found that stakeholder consultations and posting information of progress in the Government website proved to be valuable during the pandemic for keeping stakeholders informed and engaged. Working with local counterparts to co-author reports was also productive for the Education RAS (P162927) and added significant value. Likewise, strong engagement with the private sector was key in getting the Productivity Study and Report RAS (P173238) off the ground and giving visibility to the engagement. The Productivity RAS recommended to invest in a communication strategy to manage expectations in a politically sensitive sector. Finally, the RAS found that the use of tools (rather than reports) such as training stakeholders to use excel models and data rather than views and opinions could be more effective approaches to convey key messages regarding the competitiveness of the sector. For the program formulation of the next CPF, consultations and dissemination of information should be strategically planned at an early stage and ASAs should focus on bringing out key messages to public debates and inform decision making. The consultations and dissemination should be implemented with the Government. 59 https://african.business/2022/02/apo-newsfeed/world-bank-report-on-the-sugar-cane-sector-review-released. 49 53. Close WB-IFC coordination has been critical for improving the policy dialogue and opening new entry points for WBG engagement. Such new areas have been the cluster/regional approach for strengthening the Mauritian textile sector, and the institutional collaboration on the CEM formulation and dissemination. The COVID-19 crisis has further accentuated the opportunities for developing regional value chains and improving trade integration.60 Similarly, discussions are underway on potential opportunities to shift the country’s energy sector towards more renewable sources, in addition to exploring private sector participation in the waste management sector through PPPs. IFC and MIGA, in close collaboration with the World Bank, need to further explore opportunities over the next mid-term to support foreign investors in Mauritius, prioritizing projects that support job creation and green development. 54. IFC should review its value proposition in middle/high-income countries such as Mauritius – both through its investment instruments, as well as advisory services – to create new market opportunities and mobilize other financiers. In high-income countries such as Mauritius, financing instruments available to IFC for its support to the private sector during the COVID-19 crisis were limited. This includes constraints on the use of the COVID-19 emergency facility. As a result, some potential investments being considered did not materialize. In response, IFC is strengthening its analytical work in collaboration with the WB, which includes the CEM and CPSD, to better identify specific policy reforms vital for lifting up the competitiveness of the Mauritian economy. IFC needs to seek opportunities to expand its advisory work with a focus on strengthening its pipeline. From areas targeted under the last CPF such as PPPs for the solid waste management, renewable energy (RE), and exploring integration of Mauritius in regional value chain of the textile sector, IFC will need to look at new frontier areas in line with its long-term development objectives.61 The next CPF engagement will benefit from IFC pursuing more aggressively new market opportunities and WB/IFC division of labor on PPPs/PCM/MFD, complemented by WB instruments, such as RAS. WB/IFC collaboration needs to identify key policy reforms aimed at supporting private sector development. Such potential emerging areas to explore are the nexus between the education and innovation ecosystems, support to the internationalization of Mauritian firms in the broader African region, renewable energy solutions, private sector participation to enhance health sector service delivery. 60 As part of the crisis response initiatives, the WBG is exploring future scenarios for the textile industry in the region, including a cluster approach that can be developed by nurturing and strengthening the nascent value chain that has emerged organically and allows for backward as well as forward integration between South Africa, Mozambique, Mauritius and Madagascar. 61 IFC launched a CPSD in Mauritius, as a joint WB-IFC analytical effort aimed at identifying key constraints and opportunities for private sector development in selected sectors in Mauritius. The WB and IFC conducted a joint mission in March 2022 for both the CPSD and CPF to improve the design of the next CPF. 50 Annex 1: Status of Mauritius – 2017-2022 CPF Results Matrix Summary table Description Status at CLR Overall rating Objective 1: Improved Environment for Regional Trade and Investment Indicator 1: Number of business people Achieved entering Mauritius Achieved Indicator2: Elimination of non-tariff Achieved barriers (NTB) Indicator 3: Increased capacity to develop Achieved policies in digital governance Additional evidence: Objective 2: Increased Capacity to Implement Education Reforms Indicator 4: Government capacity to Achieved implement the Nine Years of Continuous Achieved Basic Education reform in line with international good practice is strengthened Objective 3: Improved Public Sector Effectiveness for Planning and Crisis Management Indicator 5: FY22/23 budget integrates Partially Achieved Partially Achieved forward looking strategic analysis and (In progress) planning goals through the work of the Economic Research and Planning Bureau Objective 4: Build Capacity to Implement Strengthened Financial Sector Governance Indicator 6: BoM migrates to a forward Achieved Achieved looking, risk sensitive supervisory approach for the banking system by 2019. Indicator 7: Payment regulations are Achieved adopted to facilitate access to new financial products and services to Achieved households and small business retailers, including mobile money. 51 Annex 2. Mauritius FY17-22 - CPF Results Matrix Evaluation Baseline/ Lessons and Suggestions for the Objective Indicator Status at CLR WBG Program Instruments target New CPF Focus Area 1: Increasing Competitiveness Objective 1: Improved Environment for Regional Trade and Investment Indicator 1 Baseline: Achieved: 50,543 business-people Number of business- 37,410 (2013) entered Mauritius in 2019 (pre- Lending people entering pandemic). Regional APEI DPO (P146512)-FY16; Mauritius Target: Completed 41,150 (2021) Source: Statistics Mauritius (+10%) ASA Indicator 2 Baseline: n/a Achieved: 20 NTBs removed Completed Elimination of non- Data Driven Development and ICT tariff barriers (NTBs) Target: 10 NTBs Source: APEI Regional DPO Policy TA (P161878) Repetition and reinforcement of removed Strengthening Regional Agriculture training on Open Data and building Indicator 3 Achieved: for APEI Countries of trust Increased capacity to ̶ TA to draft a transparent and for regional trade (FY19) (P168226) develop policies in Open Government Data policy. Support for Mauritius-Africa Strategy GoM saw several cycles four digital governance ̶ TA to establish Open Data Bilateral ministerial and PS changes over initiative and governance Program (FY19) (P171883) two years. This lack of continuity structure. Transforming Strategic Planning for made implementation more ̶ 75 government officials trained economic difficult. development (FY21) (P171558) Source: Closing Summary of Data Country Economic Memorandum Driven and ICT Policy TA (FY21) (P171584) Ongoing RAS TA on Insolvency, Secured Transactions and Doing Business (FY22) (P170028) ̶ RAS-Review of the sugar cane sector. The RAS provided policy advice on reforms to the sugarcane sector. GoM made changes in approach for purchasing energy from the sugarcane industry, adjusting upwards the price paid for bagasse. This was in-line with one of the recommendations of the report; however, other reforms still pending. ̶ RAS-Productivity Study and Report. Based on extensive consultations with stakeholders, the report takes stock of the country's Additional evidence recent productivity trends and put forward specific policy recommendations to boost productivity growth in the future. The impetus for this report, and its underlying data collection exercise, is to support the mandate of Mauritius's National Productivity and Competitiveness Council (NPCC). The NPCC seeks to encourage a national dialogue on productivity that informs stakeholders and promotes sound government policy and public-private partnerships 52 Baseline/ Lessons and Suggestions for the Objective Indicator Status at CLR WBG Program Instruments target New CPF FOCUS AREA 2: FOSTERING INCLUSION Objective 2: Increased Capacity to Implement Education Reforms Indicator 4 Baseline Achieved. ̶ Government’s ownership critical. ASA Government capacity (2017): Plans in Outputs: The RAS completed: (a) a ̶ It’s important to ensure that the Youth and Women Inclusion and to implement the line with technical note on the School programs are client oriented and Using Data for Decision-making ASA Nine Years of international Academies; (b) a comprehensive respond Government’s (P171809) Continuous Basic good policy paper on secondary school priorities. Country Economic Memorandum Education reform in practice. governance, “Towards a New - It would have been helpful to (P171584) line with Governance Model for Excellence identify more clearly the metrics international good Target (2022): in Mauritian Regional Secondary for capacity-building to monitor RAS practice is Adjustments to Schools”; (c) ICT strategy for and demonstrate important Technical Support for strengthened. implementation Education; (d) a business plan for achievements in these Implementation of Nine-Years made in the Mauritius Academy of dimensions that were not Continuous Basic Education response to Teachers captured by the indicators used. Schooling Reform RAS (P162927) evaluation ̶ RAS’ proposals should ensure findings and Source: Closing summary of that there are enough resources Transforming Strategic Planning for international Education RAS (P162927), to support implementation of economic development (P171558) good practice. the reforms (on top of supporting design and initial Ongoing: Public Expenditure Review training). (P176975) The Youth and Women Inclusion and Using Data for Decision-Making ASA and the Transforming Strategic Planning for Economic Additional evidence Development RAS also drew attention to skills development, inclusion of marginalized groups and unskilled women and youth. In addition, the 2021 CEM highlighted key remaining areas of education reform, both in higher skills development and inclusiveness. FOCUS AREA 3: BOLSTERING RESILIENCE AND SUSTAINABILITY Objective 3: Improved Public Sector Effectiveness for Planning and Crisis Management Indicator 5 Baseline Partially Achieved. ASA FY22/23 budget (21/22): Not Data-Driven Development and ICT integrates forward the case FY22/23 budget integrates forward Policy TA (P161878) looking strategic looking strategic analysis and analysis and planning Target (2022): planning goals through the work of Informed by core ASA (CEM and Transforming Strategic Planning for goals through the Budget reflects the Economic Research and PER) complex and multi-sector Economic Development. (P171558) Planning Bureau second generation reforms will work of the inputs from PER in progress. It will support Economic Research Bureau for increased efficiency in public require a high level of Country Economic Memorandum and Planning Bureau strategic spending. capacity for efficient coordination and coherence across (P171584) analysis and resource allocation, including during different agencies. planning critical phases of recovery and fiscal Ongoing: Public Expenditure Review consolidation following shocks, such (P176975) as a pandemic and natural disasters. 53 Baseline/ Lessons and Suggestions for the Objective Indicator Status at CLR WBG Program Instruments target New CPF Source: Ministry of Finance, Economic Planning and Development Objective 4: Build Capacity to Implement Strengthened Financial Sector Governance Indicator 6 Baseline: n/a Achieved: The BoM launched a ASA The BoM migrates to migration process to a forward Completed a forward-looking Target: Output looking, risk sensitive supervisory Strengthening Insurance Sector risk sensitive approach for the banking system Regulation; Financial Sector supervisory approach by 2022. Assessment Program (FASP) Follow for the banking up TA (P160871) system by 2022 Source: Closing summary of Enhancing Supervisory Capacity of RAS BoM (P165248) Money Laundering and Terrorism Financing Risks Assessment (P162592) Indicator 7 Baseline: n/a Achieved: Payment’s regulations Payments regulations are adopted to facilitate access to Ongoing are adopted to Target: Output new financial products and Enhancing Supervisory Capacity of facilitate access to services to households and small BoM (P165248) new financial business retailers, including products and services mobile money. TA on Insolvency, Secured to households and Source: Closing summary of Transactions and doing business small business Enhancing Supervisory Capacity of reforms RAS (P170028) retailers, including BoM (P165248) mobile money. Transforming Strategic Planning for Economic Development RAS (P171558) Supported under the Transforming Strategic Planning for Economic Development RAS, the RBS consists of various modules that address each category of banking risk – credit, liquidity, market, operational, AML, capital adequacy, and governance. Methodology for all modules has been developed and pilots have been carried out for credit, liquidity, and AML risks, for which Additional evidence user manuals have also been developed. Manuals for the remaining modules will be ready by August 2022, after which the remaining pilots will be carried out. Once data from the various pilots have been analyzed, the methodology/manual may have to be fine-tuned and followed by a full pilot of the whole RBS as from November 2022. 54 Annex 3 (a): Mauritius Lending Program Planned vs. Actual Proposed Approval Closing Amt Task ID Project Name Sector FY FY FY ($USM) P163248 Mauritius Statistical Capacity Building Project Poverty 2017 2017 2020 35 P173591 DRM DPO with a Catastrophe DDO Urban 2020 Dropped 2024 P155442 Second Accelerated Program for Economic MTI 2017 Dropped 15 Integration (APEI) DPO-2 N/A Southwest Indian Ocean Fisheries Project (SWIOFish) Environment 2017 Dropped 10 N/A CPVID-19 Response DPO MTI 2020 Dropped 100 Annex 3 (b): Mauritius CPF Advisory Services and Analytics, FY17-FY21 Task ID ASAs Approved Delivered Status P155091 Building the Ocean Economy 2015 2017 Completed P160472 Skills for Innovation 2016 2017 Dropped P160871 FSAP Follow-up TA 2016 2017 Completed P161878 Data-Driven Development and ICT Policy Technical Assistance 2016 2017 Completed P164706 Fostering Economic Mobility and Promoting Youth Employment 2017 2018 Completed P164352 Mechanisms for Increasing Female Labor Market Participation in 2017 2018 Dropped62 P169786 Productivity Dialogue 2018 2019 Completed P168226 Strengthening Regional Agriculture Imports of Mauritius and Seychelles 2018 2019 Completed from APEI Countries P168012 Promoting sustainable economic growth through equity-friendly and 2018 2019 Completed business-enabling policies P171883 Support for Mauritius-Africa Strategy Bilateral Program 2019 2020 Completed P171809 Youth and Women Inclusion and Using Data for Decision Making 2019 2020 Completed P164368 Potable Water Sector PPP and Reform Project 2017 2020 Completed 63 IO Social Protection Policy Dialogue (TA) 2016 2021 Completed P171584 Country Economic Memorandum 2019 2021 Completed P176975 Public Expenditure Review 2021 2023 Active Agreement Agreement Task ID RAS Status Start Date End Date P158935 Support to Potable Water Sector Reform and PPP for the National Water 2016 2017 Completed Authority CWA P162592 Money Laundering and Terrorism Financing Risks Assessment 2016 2019 Completed P173238 Productivity Study and Report 2019 2021 Completed P171987 Review of the Sugar Cane Sector of 2019 2020 Completed P171558 Transforming Strategic Planning for Economic Development 2019 2021 Completed P162927 Education 2017 2020 Completed P170028 TA on Insolvency, Secured transactions and Doing Business Reforms 2019 2022 Active P165248 Enhancing Supervisory Capacity of BoM 2017 2023 Active 62 Other dropped tasks before AIS were: Reducing Skills Mismatches in the Mauritius Labor Market (ASA) dropped before AIS and covered extensively under the 2021 CEM; Water Sector Reform RAS (replaced by RAS P164368 and ASA P158935); and Mauritius Statistical Capacity Building Project (TA), provided through the Mauritius Statistical Capacity Building IPF (See lending table) (P163248), financed by the Trust Fund for Statistical Capacity Building. 63 Social Protection Policy Dialogue (TA) was Internal Order to provide technical inputs and just-in-time support on social protection reform throughout the CPF period. 55 Annex 4. IFC Committed and Outstanding portfolio FY FY17-FY21 1. Mauritius Historical Investment Program Commitments by Fiscal Year (as of Feb 28, 2022) FY22 FY17 FY18 FY19 FY20 FY21 FY17-FY22 YTD Long Term Finance (LTF) - 0.0 0.0 37.5 0.0 - 37.5 of which IFC Own Account - 0.0 0.0 37.5 0.0 - 37.5 of which Core Mobilization - 0.0 0.0 0.0 0.0 - - Short Term Finance (STF) - - - - - - - 2. Mauritius Investment Portfolio by Industry Group (as of Feb 28, 2022) Industry Group FIG MAS CDF Total Committed Exposure 25.0 - 8.9 33.9 Portfolio Outstanding 25.0 - 7.0 32.0 of which Loan Outstanding 25.0 - - 25.0 of which Equity Outstanding - - 7.0 7.0 Undisbursed - - 1.9 1.9 Non-Performing Loans (NPLs) - - - - NPL Ratio (%) 0.0% 0.0% 0.0% 0.0% 3. Top 5 Portfolio Clients by Committed Exposure in Mauritius (as of Feb 28, 2022) Committed Portfolio Client Industry Industry Group Sector Exposure Outstanding Bank One Mauritius FIG Financial Markets 25.0 25.0 GCF-SI Limited CDF Collective Investment Vehicles 7.3 7.0 Adenia III CDF Collective Investment Vehicles 1.6 0.0 Annex 5. MIGA’s Guarantee Portfolio Gross Exposure Project Name Effective date Expiration date Investor Sector (US$ million) ABSA/Barclays ABSA Group 12/06/2019 12/05/2034 Financial 94.1 Mauritius LTD Total 94.1 56 Annex 3: World Bank Portfolio in Mauritius (as of August 10, 2023) Concept Lead GP/Global RAS ACS - Original/ Task ID Task Name Task Type Note Themes (Y/N) Revised Date Approval Mauritius - Enhancing Finance, 20-Dec- P165248 Supervisory Capacity of Competitiveness and Advisory Y 30-Apr-2025 2017 Bank of Mauritius Innovation Mauritius Public Macroeconomics, Trade 29-Jun- P176975 Analytical N 29-Sep-2023 Expenditure Review and Investment 2021 Finance, Mauritius National Risk 20-Jan- P179856 Competitiveness and Advisory Y 30-Oct-2023 Assessment 2023 Innovation Mauritius 10-year Finance, 24-Apr- P180250 Blueprint for the Tourism Competitiveness and Advisory Y 15-May-2025 2023 Sector Innovation Mauritius Transition to 01-Jun- P180651 Energy & Extractives Analytical N 31-Dec-2024 Renewable Energy 2023 57 Annex 4: IFC Portfolio in Mauritius (as of July 31, 2023) 1. Mauritius Historical Investment Program Commitments by Fiscal Year FY24 FY19- FY19 FY20 FY21 FY22 FY23 YTD FY24 Long Term Finance (LTF) 0.0 37.5 0.0 0.0 0.0 0.0 37.5 of which IFC Own Account 0.0 37.5 0.0 0.0 0.0 0.0 37.5 of which Core Mobilization 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Short Term Finance (STF) - - - - - - - 2. Mauritius Investment Portfolio by Industry Group Industry Group FIG MAS CDF Total Committed Exposure 12.5 - 7.3 19.8 Portfolio Outstanding 12.5 - 7.0 19.5 of which Loan Outstanding 12.5 - - 12.5 of which Equity Outstanding - - 7.0 7.0 Undisbursed - - 0.3 0.3 Non-Performing Loans (NPLs) - - - - NPL Ratio (%) 0.0% 0.0% 0.0% 0.0% 3. Top 5 Portfolio Clients by Committed Exposure in Mauritius Committed Portfolio Client Industry Industry Group Sector Exposure Outstanding Bank One Mauritius FIG Financial Markets 12.5 12.5 Collective Investment CI GCF-SI CDF 7.3 7.0 Vehicles 4. Top 5 Investment Pipeline Projects by Total LTF in Mauritius Industry Commitment Fiscal IFC Own Project Industry Group Total LTF Probability Year Account Sector - - - - - - - 5. Advisory Portfolio Sector Project Financial Markets Bank One – Climate Risk Mgmt. Support 58 Annex 5: MIGA Portfolio in Mauritius (as of end-FY23) MIGA's portfolio in Mauritius Investor Project Business Region Host Investor Risk Gross Name Name Sector Country Country Covers Exposure (US$) ABSA/Barclays Sub-Saharan ABSA Group LTD Financial Mauritius South Africa EXP 94,050,000 Mauritius Africa Grand Total 94,050,000 MIGA's portfolio in Regional Development Banks of relevance to Mauritius Investor Project Business Host Investor Risk Gross Region Name Name Sector Country Country Covers Exposure (US$) Trade and Regional *22 countries in Sub-Saharan Standard Chartered Bank Development Development Africa including United Kingdom NHFO-RDB 372,240,000 Africa Bank (TDB)* Bank Mauritius Grand Total 372,240,000 *The data pertain to MIGA’s gross exposure in the TDB, and not solely to Mauritius. 59