After the fiasco of his supposedly ingenious proposal for “helicopter money”(the monetisation of debt) which received quite a beating from different quarters (including us), he tries to make up by proposing a new unworkable concoction of a Recovery Fund of Rs 40 billion- a fund that he claims will be burden sharing, fair, equitable and effective. The contributors to such a fund will be the Government, Bank of Mauritius, the Commercial Banks, the Corporate sector, IMF and WB and other donors or Partners in Development.
Ce Recovery Fund n’est tout simplement que de la poudre aux yeux. It’s a stratagem worked out by Sithanen for the private sector to get easy money. Why do we think that it is unworkable?
Let’s us start by the Bretton Woods institutions; do you find them disbursing money to a private fund (sic)? They usually provide funds directly to government for mainly macroeconomic adjustment programmes and sectoral reforms/studies(sugar sector, energy, ocean economy, etc)
Similarly for Partners in Development, they fund , via budget support programmes, sectors or projects with certain objectives in mind like regional integration, protection of the environment or climate change mitigation. Recovery funds are not not really their cup of tea. Sithanen cannot pretend that he is not aware of that.
As for the commercial banks (u do recall their recent reclassification by Moody’s due to the outbreak's credit-negative effects on banks’ asset quality and liquidity) whose funds are mostly involved in trade financing which have been severely hit by the economic meltdowns, they are themselves at risk and they are more likely to spare some peanuts for the Fund while making sure that they lay aside enough of their reserves to cover the increasing bad debts of their bankrupt clients that will be piling up.
As for Government, we cannot expect much as they have already been overgenerous with public money bailing out the private sector. We are left with the Central Bank which has now very little reserves left with the transfer of Rs18 bn from its reserve fund. Thus "Helicopter money" cannot be ruled out.
And the corporate sector in all this, why don't they put in more equity themselves in their heavily under-capitalised businesses for a start !!!
As we see , Sithanen’s big idea of a Recovery Fund of Rs 40 billion is merely smoke and mirrors.
