From Table 1, we can see that the Consolidated Budget deficit, inclusive of special funds, has been quite high for the past two years, a result of both cyclical issues and structural challenges. There are likely to be future concerns about revenue buoyancy. Both total revenue and tax as a % of GDP have been dipping while current expenditures are likely to increase further to more than 22% of GDP with the continuing high growth in government wage bill and the additional Rs 4.7 billion in old age pension. This may not be a problem in 2015 if it is met from the Special Funds but will be a big burden in future years.
Expenditure on un targeted social benefits is already taking a huge chunk of our recurrent expenditure at 5% of GDP. Moreover, capital spending at less than Rs 10 billion, some 3.8% of GDP, is not keeping pace ,especially in an environment of declining private investment, with the ambition to transform Mauritius into an international hub.
These are some of the fiscal constraints which do not provide much room to pump prime the economy-more of walking a tightrope between fiscal consolidation and development expenditure. And at the international level, the IMF recently warned that the world could face years of below-par growth, while economists from the World Bank also cautioned that growth of developing economies was likely to average 2-2.5 percentage points less than that seen before the 2008 global financial crisis. It is in such an environment that the new Minister of finance is expected to get a grip on the budget deficit, revive the investment cycle to bring the economy back on a high-growth path of 5.7%, restore trust in government and build confidence in the economy.
The Budget, a few days hence, is sailing on the high seas of expectations. It is being perceived as the chance for the new government to demonstrate its capability to act on the ground. Many of us are expecting the Finance Ministry to present a grand budget that will make a break with the previous policies and once for all transport Mauritius into good days. Our expectations have sentiments running ahead of actions. But we fear a repeat - a repeat of what has happened during the past ten years, a failure to leverage our advantages to usher in novel structural reforms and pillars of growth. We squandered the momentous opportunity to convert the economy hence secure our collective future. Instead we were served more or less a copy of the policies of earlier ones. Indeed like the previous budgets we have apprehensions that this one also may be a continuation of the same short term timid policies, devoid of the vision required to make it a catalyst. What is required is a road map for concrete reforms and new path breaking ideas and strategies.
Why these apprehensions? Because of the unwise decisions that have been taken lately like the jettisoning of the Programme Based Budgeting for the archaic line budgeting; the continuation with some of the opacities of the Special Funds (the Build Mauritius Fund) rather than opting for integration with the Budget which leads to better coordination, accountability and transparency; the recourse to an increasing number of grand oldies, coming back as the Jurassic Park dinosaurs to haunt us from their bureaucratic ivory towers with more of the same stale ideas and policies and discredited dogmas; a Gold Fund that proposes returns on speculative activities rather than tax free returns on Equity-linked Saving Schemes; "petit-copain" nominations that belie our expectations of better governance from Corporate Mauritius via independent directors on the board of State-Owned Enterprises to act independently; and the disparate din on scandals that has been making news but fails to mask the fact that the vision of the economy stands the risk of appearing like another edition of “promises” promised.
We wish we were mistaken. Though the journey out of the woods is likely to be long, we can only hope for a budget that breaks us free of policy paralysis and a self inflicted slowdown . While keeping the deficit down , this time without the accounting tricks, we expect to see some steps towards boosting investment and productivity, technology, human ingenuity and entrepreneurship - most of which will continue to be in short supply for years to come. A budget to break loose from checks that prevents entrepreneurial ambitions from following its creative impulses; a budget that symbolizes the culmination of one journey and the beginning of another.
Truly major reforms await the country Things that were not tried in the past for eg a transformation of the financial sector that brings in a new regime of innovative financial instruments and operators. More revenue raising efforts through a strengthened Financial Reporting Council (FRC) would help to widen the tax base, (especially from the larger companies). Increase investments and continue providing more room for capital spending, while restraining current spending to limit the overall fiscal deficit. There’s certainly scope for reducing profligate and unproductive government spending. The price paid for the welfare state, among others, has been deficient infrastructure; Capital expenditures should reach at least 5% of GDP, and the implementation of capital projects upgraded to ensure that budgeted amounts are actually spent, and project outcomes delivered. Start reviewing the provision of ‘free’ health, education and other public services in a long term plan, and bring about greater public accountability, while exempting lower income groups. Improve civil service efficiency and productivity, especially through a fair, open and transparent recruitment process. Attract more investments for targeted industries and drive forward the Vision 2030 document that will chart out a proper development strategy for the country to achieve its medium- and long-term objectives. For this exercise we should aim at having the very core competencies and talents that we can rely upon to resolve our national problems and challenges and frame the right policies to shape this new Mauritius. It should not be difficult to set up such a team of visionaries, whose main responsibility, would be to lead us to the status of High Income Economy. Already there is a perception that this government appears somewhat thin on talent. As it settles down it will have to loosen its "hold-the-fort" position to usher in more competent people irrespective of their previous political affiliations and allegiance.
