And because the boy lives in a country where imagination is not allowed, when he was found out to be having an imagination, he is forced not to imagine things.
At the end after the boy was has no more imagination, he could only see the mermaid as a little fish swimming in a fish tank. However, after the boy put her into the sea, the boy could see her as a mermaid again swimming happily in the ocean.
I honestly thought it was a little sad of how people are forced of their feelings and thoughts in this country, but at the same time, it's also happy how the mermaid was happier in the ocean.