Government Programme(GP) 2020-24 -Towards an inclusive,high income and green Mauritius, forging ahead together- lays down the new government's vision and roadmap for economic development via a series of nice soundbites-most of which we have heard before .
The missing element is the big bang reforms that will redress our weakening macroeconomic fundamentals and address the factors behind the ordeal of the productive sectors, ( a plateauing real GDP growth, a current account (excl GBC) to GDP ratio above 11%, the imbalance between investment and savings, unsustainable budget deficits and public debt whereas sector-wise, manufacturing is in a mess, services sector is not growing fast enough, and agriculture continues to be at the mercy of external elements and internal inherent problems) and take Mauritius to a whole new orbit of growth.
The more than one-hour long government programme has only these minimal lines on the macroeconomic parameters -"resilient GDP growth with low inflation and low unemployment..ensuring that public debt remains at a reasonable level and targeted at productive investment"….On the productive sectors, it is an unqualified disappointment -if not disillusionment on some of our expectations, however low, from the new regime that it will wake up to the realities and somehow get its act together -which will continue to have its outright impact on the depreciation of the rupee.
The more than one-hour long government programme has only these minimal lines on the macroeconomic parameters -"resilient GDP growth with low inflation and low unemployment..ensuring that public debt remains at a reasonable level and targeted at productive investment"….On the productive sectors, it is an unqualified disappointment -if not disillusionment on some of our expectations, however low, from the new regime that it will wake up to the realities and somehow get its act together -which will continue to have its outright impact on the depreciation of the rupee.
When you scratch the surface-some of the biggest headline grabbers, and a few of the new sound bites- the GP 2020-24 shows a lack of the necessary substance to address our economy's macroeconomic imbalance and structural issues, resuscitate the country's ailing economy and realize growth rates of above 4% .
Indeed the GP 2020-24 lacks the necessary reforms that will power the growth generators to realize the above 4% growth rates. How can we realise most of the measures announced in the government programme if the basic ingredients are missing ? We have to put our house in order first before even thinking of building and strengthening some old and new pillars. This regime seems to be fundamentally wrong and totally out of tune with the economy. The only reference to fiscal policy is this ridiculous statement that “ Fiscal policy will continue to support lower and middle-income households and in this respect, Government will honour its pledge to abolish the Municipal Tax on property for persons owning only one house.”(sic).
We are having affair with a bunch of jokers. With a budget deficit announced as 3.2 % of GDP for FY 2019-20, but which was really around 5.2% if we include the special funds and the off-budget expenditures. Add to this the Rs 6 billion of additional expenditure on pension for FY 2019/20 and a further Rs 4 billion for FY 2020/21; the budget deficit for FY 2019/20 as a % of GDP blows up to 6.4 % of GDP and a corresponding debt figure of around 70% of GDP.
Is that the reasonable debt level that the GP 2020-24 is bragging about ? You do recall the controversial budget measure of raiding the BOM special reserve fund to the extent of Rs 18 billion to hide the government’s chronic inability to control overspending and the high fiscal deficits and which does not remove the source of the bulging public debts?-Such excessive transfers from the Central Bank-a practice that is carried out only by the worst of regimes in Africa and Latin America- indiscriminately opens up the floodgates for deficit financing, undermines the central bank’s independence and damages its credibility in financial markets.
Thus the GP 2020-24 has left us with a foretaste that we cannot expect much from this regime in terms of a slew of critical and structural reforms and hard and bold decisions meaning that it will continue in its own dubious ways to postpone the day of reckoning. But for how long ?
Mts cannot afford to go backwards in time. For how long will this regime survive if it continues to fail in delivering on above-average GDP growth, youth employment, re-igniting the different engines of growth, skilling the labour force, reasonable levels of budget deficits, public debt and the current account of the BOP, productive FDI, low-cost housing, relative poverty and genuine inclusiveness ?
