(Published in L'Express, 15 Feb 2018)
Data on budgetary central
government accounts are reported monthly to the IMF and published by Statistics
Mauritius. The latest figures on public finances relate to Dec 2017, and thus
provide an indication of fiscal performance at a midway point of the 2017-18
budget.
Two remaining Special Funds (SF), namely the National Resilience Fund, and the Build Mauritius Fund, have been closed, with the surplus balances transferred to the Consolidated Fund in 2017-18. An amount of Rs 3.8 bn was transferred in Nov 2017, and an additional Rs1 bn in Dec 2017, or a total of Rs 4.8 bn in July-Dec 2017. A total Special Funds transfer of Rs 5.7 bn was budgeted for 2017-18. For derivation of the fiscal deficit, the SF contribution should not be counted as revenue (the latest IMF Report appears to be uninformed of these SF transfers to revenue). The official deficit figure for 2017-18 is thus 3.2% of GDP, whereas it should be adjusted to 4.4% of GDP, after excluding the SF contribution.
Budgetary Operations
July- Dec 2017
|
Budget 2017-18
|
Revised Budget 2017-18
|
|
ANFA
(capital spending) Rs bn
- as % of Budget
|
2.8
22%
|
12.7
|
7.6
60%
|
Deficit
inc. Special Funds (% of GDP)
|
-0.3
|
-3.2
|
-1.9
|
Deficit
exc. Special Funds (% of GDP)
|
-2.3
|
-4.4
|
-3.1
|
Another
item that the IMF has missed out in its budget estimates for 2017-18 is the
off-budget expenditures by State Owned Entities (SOEs). For a better estimate
of the true budget deficit, a consolidation is also needed with the off-budget
expenditures by SOEs in 2017-18. Metro Express was estimated to spend Rs 4.1 billion
financed by the Indian Exim loan of USD500 millions routed via the SBM as
preference share investments, and by equity investments from Indian grants to
the budget. This is a fiscal gimmick or “colourable accounting” that allows SOEs to finance their expenditures by equity
instead of debt, so as to avoid inclusion of public borrowings in public sector
debt. Off-budget expenditure estimates are not considered important at this
stage, but will become significant by June 2018.
For
July-Dec 2017, both revenue, excluding SF contributions, and current expenses are
running at 47% and 46% of the year’s budget estimates, respectively. Capital
spending is far below budget, at only 22%, or only Rs 2.8 billion relative to
the budgeted amount of Rs12.7 bn. The
deficit, excluding SF contributions, for July-Dec 2018, stood at a low of 2.3%
of GDP. Assuming capital spending picks up in the remaining half of the fiscal
year to 60% of budget, or Rs7.6 billion, and the trends in revenue and expenses
are maintained, the deficit, excluding SF contribution, would be around 3.1% of
GDP in 2017-18, which is far less worrying than the projected deficit of 4.4%
of GDP. But as in previous years, the subdued fiscal deficit is mainly the result
of a substantial shortfall in capital spending.
Clearly
capital spending remains a hard nut to crack for policymakers. They continue to fail in
addressing the implementation capacity constraints within the public service
and across sectors. The glaring instances of inadequacies in concept, design,
execution and monitoring of projects, cost overruns, unforeseen delays,
and the technical and legal proceedings, as well as weak strategic planning, inadequate
project preparation and poor project selection, have continued to,
year after year, mar the implementation of capital/infrastructure
projects. With private sector investment expected to grow at more or less the
same rate as last year, it
appears that the budget won´t be providing the required stimulus to investment,
meaning that we will have to postpone, once more, the possible realization of a potential
growth rate of 4 percent or more and stick to our anaemic rates.
