Mauritius needs to tighten monetary policy and modernise its framework to respond to shocks and tackle inflationary pressures, the International Monetary Fund said.
In a statement late on Monday, the IMF said its directors had noted on their yearly consultative mission to Mauritius that "inflation has picked up on the back of supply shocks, but there are signs of further building inflationary pressures".
"The mission recommends tackling inflationary pressures by tightening monetary policy, while modernizing the monetary policy framework to strengthen policy response to shocks," it said. The Indian Ocean island's Key Repo Rate (KRR) has been held steady at 4 percent over the last year.
The IMF mission said it expected headline inflation to remain above 5 percent during the second half of 2017 onwards, mostly on account of second-round effects. Mauritius's inflation fell to 5.3 percent year on year in July from 6.4 percent a month earlier, data from its statistics office showed.
The fund also projected real GDP growth in 2017 at 3.9 percent on the back of improved performance in the construction sector. The forecast is in line with the government's projections.