(Published in MTimes 10 May 2019)
There is very little that differentiates one regime from another in terms tortuous accounting practices in relation to the budget figures. We seem to have become past masters in conjuring budgetary tricks, and this has been going on under different regimes.
Readers will recall that, following the issuance of the Floating Rate Notes (FRN) in October 1995, the Manraj-Sithanen team created the off-budget National Infrastructure Development Fund (NIDF). Statistics Mauritius, which was then under Ministry of Economic Planning and Development, started publishing two budget deficit figures, with and without the off-budget NIDF.
The curious arithmetics in our budget numbers continued in earnest under the tandem Mansoor-Sithanen. The chronic underspending on the capital side of the Mansoor-Sithanen budgets was not allowed to flow through to the budget bottom-line, resulting in smaller deficits. Government appropriated the surplus funds and transferred them to a set of Special Funds. The spending from the Special Funds were not included in the calculation of the overall budget deficit. Though the Special Funds had existed since the 2007/08 and 2008/09 budgets, it was only in 2011, through the Public Expenditure and Financial Accountability (PEFA)assessment, that the IMF became aware of the off-budget funds and recommended that we fully integrate the Special Funds into the budget for better fiscal transparency and more effective expenditure management.
In his intervention in the National Assembly in 2009 on the 2010 budget, Hon Pravind Jugnauth, then sitting on opposition benches, raised the issue of the off-budget Special Funds: “Au début de mon intervention j’avais parlé de fonds mirobolants, portant des noms ronflants, mis sur pied depuis 2008… Ces fonds, je l’ai souvent dit, M. le Président, avaient été créés avec deux objectifs. Premièrement, pour masquer l’échec sur le Capital Investment et deuxièmement pour manipuler le déficit budgétaire.”
But the colourable accounting practice of creating special earmarked funds outside the budget and that were not consolidated with the Budget was not discontinued under Hon Jugnauth, the present Minister of Finance. On the contrary new funds have been created and all kinds of reasons were given for justifying the off-budgets expenditures.
But now more and more people are becoming aware of the dubious accounting in the budget figures. Many local accounting firms have highlighted the lack of transparency in the Budget and have demanded that these off-budget funds be integrated with the budget. In the 2019 IMF Art IV Report, the IMF has included the special and other extra-budgetary funds in calculating the budget deficit which is shown in Table 2A and 2B of the Report as the Consolidated Balance.
Unfortunately, the IMF has mixed up the figures, for e.g. for FY 2018-19, it has taken the figure of 9,320 for Net Acquisition of Non-Financial Assets instead of 11,446. We have reworked the IMF figures which come close to our own estimates of the consolidated budget deficit as shown below. These more comprehensive budget figures give a better idea of the fiscal stance and an important input for policymakers in deciding on policies to strengthen macroeconomic resilence.
There is nothing objectionable per sein the setting up of Special Funds and public entities for justifiable purposes, as long as their transactions are consolidated with the budget for a proper recording and evaluation of the fiscal deficit and of public debt. A proper reporting of the budget balance will go a long way towards “enhancing fiscal transparency and bolster credibility,” comments the 2019 IMF Art IV report at Para 24
