The IMF in its two latest reports on the Mauritian Economy (Public Expenditure and Financial Accountability Assessment and the 2011 Article IV Consultation -Staff Report) pointed fingers at some of the curious arithmetic in our budget numbers. It noted that the chronic underspending on the capital side was not allowed to flow through to the budget bottom line, resulting in smaller deficits. Government reappropriated and transferred the funds to a set of special funds. The IMF did not go to the extent of qualifying it as colourable accounting but subtly advised us to adjust the overall deficit to include spending from special earmarked funds which are macroeconomically important.
.The recalculated deficit is shown in Table I. The IMF Staff welcomed the government’s intention to close most special funds in 2011 and to place these operations in the budget. This will reduce budgetary fragmentation and is likely to result in stronger expenditure controls
Table I
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For Budget 2012 they were back at their old tortuous accounting ways, flouting the principles of sound public finances and the GFSM 2001 standards. They inflated the capital grants from Rs 1.1 billion in the estimates to 7.0 billion in the revised figures for 2011. This explains the upward revision of the budget deficit estimated around 3% in August 2011 to 3.8%. The surplus funds were credited to the resuscitated Special Funds as shown in Table II:
Table II
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Adjusting for the transfers to the funds and the subsequent payments out of the funds results in a significantly lower budget deficit in 2011 and, as payments out of funds exceed transfers the budget deficit in 2012 is, therefore, considerably larger than reported, projected to reach 5.4 percent of GDP..
Table III
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That’s not proper fiscal management, that’s irresponsible management. The Minister of Finance is right, these are ominous signs that trouble is in store. Revenue as a % of GDP has stagnated at 20% , tax revenue drops to 18%, current spending shows no improvement as a proportion of GDP whereas capital spending stayed at a dismal 2.7% of GDP as in previous years. These shifty tricks of parking special funds outside the budget to hide the ineffectiveness in implementing capital projects are having serious economic consequences Such poor fiscal consolidation is not providing the country with the means to tackle its challenges and realise its ambition of a trillion rupees GDP economy by the 2020s. It is choking off growth by limiting public investments in key sectors at a time that the private sector finds it more profitable to invest in real estate activities. We are marking time and keep missing out targets while there is so much to catch up in terms of infrastructure priorities. ( For example the expansion of the road network has to outpace the rate of addition to the existing fleet of vehicles if we are solely relying on it to reduce congestion.)Indeed, it is not responsible budgeting to show such generosity on capital gains tax, tax on dividends and interest rates, land transfer tax and the environmental fee without at the same time announcing any meaningful reforms to reduce expenses which stays at 22% of GDP. This is the time when prudence is the choice in carefully managing our infrastructure and productivity enhancement spending to relieve our bottlenecks while ensuring that the implementation of our policy priorities do not blow up the deficit to an unmanageable 5.4 % of GDP. ( The debt figures have also been readjusted from 57% to 54 % on dodgy grounds that the public enterprises debt has been discounted in accordance with Section 7 of the Public Debt Management Act )
Budget 2012 must be followed in its proper sequence. After the neoliberal policies of the TINAwallahs (There is no alternative) that allowed the rich and the corporate sector to capture all the gains of their taxation generous policies, we marked a pause with a re-centering of the policies towards the middle class before the reckless pressure to conform to a previous narrow established paradigm in 2012. While demarcating itself from the previous budget by totally bypassing the middle class, with a vengeance it seems, Budget 2012 is a nice hotch potch. It kowtows obsequiously to the big cats of the private sector, provides some quick fixes, is however short in rhetoric ( part of the rhetoric that sucks is that what is best for the fat cats should also be best for the thousands of middle class -owned management companies in the Global Business Sector . The latter is being imposed a 10 percent levy on chargeable income while other fat cats like the commercial banks, that are “funding themselves by paying a paltry 3.5%”, are reaping huge profits with their exorbitant service charges and interest rate and exchange rate spreads ) and makes a dignified attempt at trying to reach the downtrodden. But it is not ambitious enough though it had the means to do so.
In the non-sugar agriculture, the short term quick measures to provide finance for seed purchases , market intelligence and the Rs 138 million for food security will provide some relief. Fair trade certificates and new freight rebate schemes are mere add-ons to a badly needed ambitious food security Action plan (cattle-rearing, milk production, maize and some other foodcrops, food processing, a modern auction market, etc.) that integrates a regional food supply strategy. Where are we by the way with the Regional food Company ? In the ICT/BPO sector it seems that we will develop our human resources by giving occupation permits to workers earning more than Rs 30,000. That’s it full stop ! we would have solved our human capital formation needs in the sector ! Plus short-termism que ça, tu meurs ! Similar twisted thinking is reflected in the proposal to offer part time employment to foreign students. Let us first of all start by attracting foreign students by the quality of our institutions and tackle the problem of our unemployed graduates before offering employment to others.. We have a long way to go before adopting the Singapore model, we have to first of all build our institutions of learning and bond them to the world of work and thus diffuse the present explosive situation of unemployed graduates in a context where the creation of jobs are not matching the demand.
The changing nature of the tourism industry, the increasing number of air links, the bulging affluence in emerging markets, and the general technological improvement in global travel have changed the profile of tourists as well as the demands on the destination; the sector and its parameters need to be redefined. The challenge is to formulate the sector policies that best reflect these changes and the new thinking that the benefits from tourism activity should be spread more evenly throughout the society. The new rating system , the voluntary Green certification and the cleaning and embellishment programme are very practical short-term fixes. Much more is needed. The industry has to gear itself for the longer term for a new tourism that is sustainable, environmentally and socially responsible, and characterised by flexibility and choice given its limits to growth- a strategic long-term approach to the challenges facing the country's most valuable industry.
Some of the measures taken in the alleviation of absolute poverty, in social housing and for the welfare of children from vulnerable groups as well asthe pre-primary education grant and the access to crèches are laudable. But Poverty has also to be tackled at its roots ; it should not be dealt only at its superficial level, in its manifestations. Our education system for example is geared to create these ‘failures’. Far from being a system that encourages creativity to bring the potential of every child to its best, it is a system that imposes an academic discipline that limits or destroys creative potentials. To address this problem, we have thought of solutions to bring back these 30% failures to the system – the remedial classes, the introduction of pre-vocational education (with a stigma of failures attached to it), the compulsory education until 16 (with a high number of drop-outs) and now the Summer School Programme. These programmes that have been tried elsewhere have only raised the hopes of the dispossessed but not yet delivered the better life they are demanding. We have been creative about turning round the problem. It is high time for us to see and understand each child in his particular environment, to think of him as a potential of creativity and to gear our pedagogy and teaching and learning system so that we can bring these potentials to life. We are persisting in continuing in doing the other way round. The Ministry of Education adopted a timid approach to this with the introduction of the enhancement programme in primary schools. Some of the ‘star’ primary schools use this time for tutoring the students in academic lessons. How effective is the enhancement programme? We have a culture in Mauritius to be creative in finding ways to go round a problem without addressing the source of the problem and to never assess what we are doing so we never learn from past mistakes. We are creating new problems rather than addressing existing ones. And it’s only costing us a few billions.
Budget 2012-Growth for the Greater Good -distributes some goodies all over the place for the greater good. This gets us to the nub of the matter. The only missing part is the growth part. We have little to convince us that we are overspending to lay down the foundation of high-productivity, high-efficiency, high-technology and high-wage economy. We can’t find any trace of the broad- based and inclusive reforms that would generate the necessary productivity improvements and ensure long-term public investments in education, in building skills , in research and innovation , in export expansion and diversification and in boosting the overall growth rate of the economy.
While the private sector jubilates tricked into believing that the public fianances are sound and that growth is not faltering , the middle class sulks and the dowtrodden is pushed in the limelight befuddled at the attention they are getting, some of groups on the left summarises Budget 2012 as such- “Dans ce budget, il n’y a aucune mesure de développement de nouveaux piliers économiques en vue d’assurer notre souveraineté alimentaire ou notre sécurité énergétique et la création d’emplois décents »
After nine years of implementation of Programme–Based Budgeting (PBB) and continuous struggling in “deliverology”, the foreword to the PBB Budget Estimates acknowledges that they have been putting the cart before the horse and it contains 17 recommendations to keep up moving up the PBB learning curve. Some of the recommendations seem to have been lifted straight from our columns in the Mauritius Times where we have often argued for a medium to long term national plan to being the foundation of the PBB exercise. There is also mention of a new common indicator on the monitoring of budget measures. If the Minister wants concrete results in terms of “deliverology”, he will have to carry out a total clean-up for a new team that delivers on its promises.
