(Publshed in Weekly issue no 408, 9th July)
While most observers did not attribute much to the World Bank’s recent classification of Mauritius as HIC knowing very well that we will not last long in this income group , one of the poodles of the regime rushed in to echo the music set by the cheerleaders of the PMO that
« Qu’on se retrouve dans le cercle des pays à revenu élevé fait honneur à Maurice…. Cela envoie un signal fort aux investisseurs qu’ils peuvent nous faire confiance »
« Qu’on se retrouve dans le cercle des pays à revenu élevé fait honneur à Maurice…. Cela envoie un signal fort aux investisseurs qu’ils peuvent nous faire confiance »
Could you expect anything else from such nominees besides repeating parrot-like the self-created delusions of their bosses ? By their logic, in 2020 , when we would most probably return to the upper upper-middle income level, we cannot expect much in terms of foreign investment. WB classification of countries into four income groups seems to have become one of the crucial determinants of FDI, even outclassing the whole lot of disincentives in the recent budget.
If only they had cared to find out about the methodology of the WB classification, there would have been less of these triumphalism and chest-thumping which seem to be the main activity of our Economic Development Board these days, lavishly squandering taxpayers's money on Covid-free videos of Nas Daily and promotional cover wraps in "The Economist" magazine.
First, the GNI per capita(p.c) represented 97% of the WB threshold in 2018, increasing from 67% in 2011 and 85% in 2014. The current Government has not contributed in any significant manner towards reaching HIC status, except by ensuring a modest annual increase in national income. Higher economic growth would have already ushered Mauritius into HIC status. Seychelles became a HIC in 2014.
In fact, GNI p.c. remained stuck at 86% of the WB threshold in 2015 and 2016, partly because of the sizeable depreciation of the Mauritian rupee against the USD in 2015. Subsequent rupee appreciation in 2017 and relative rupee stability in 2018 has imparted a new progression in GNI p.c. to reach 91% in 2017, and 97% in 2018.
Second, as from 2018, the World Bank included the net primary income of GBCs in its GNI data series, which has added about 8% % to GNI. Without this statistical adjustment, GNI p.c. would be lower by about 6%, and would stand at only 94% of the WB threshold.
Third, Mauritius GNI per capita in 2019 stood at Rs 405,252. To this is added the Rs 32,998 p.c of the net primary income of GBCs. And on the basis of the World Bank’s Atlas method of conversion of Mauritian rupees to USD, using a 3 year moving average exchange rates adjusted for differential inflation, the GNI p.c works out to be $12,740 and the real exchange rate at Rs 34.4 compared to 34.8 in 2018 (please note inspite of the depreciation of the rupee, our inflation rate-0.3%- was much lower than that in advanced economies-2-3%). The Atlas HIC Threshold is 12,535 in 2019.
In 2020, even without Covid-19 , the outflows from the GBC sector, the continuing depreciation of the rupee and a higher inflation rate relative to the advanced economies (meaning a higher real exchange rate) would have meant a GNI p.c falling short of the Atlas HIC Threshold. It may take us years before we are able to regain this classification.
You understand now why when we hear their absurdities , we feel like grabbing these poodles by their lapels and pinning their so-called voice of business and development to the wall. Future sustainably of the growth spurt is as important, if not more, than increases in GNI per capita. Our Finance Minister seems to have got it all wrong — the target of high income status is not a destiny but an obstacle to be overcome.
