RChand Corner: Our IMF man who talks the talk but doesn’t walk the talk !

Lately we’ve been seeing an assortment of them -the old wines in new bottles- queuing up for interviews and grasping for the opening offered by the main media to try to make “un peu de peau neuve”. They have so much to say- talk and talk- it oozes out of them endlessly and effortlessly as they are very aware of the Mauritian’s proclivity to accept anything that has the seal of approval of the foreign-trained X-pert;  it’s not the addiction to being in the limelight and listened to that motivates them, but a “so-called”  inner longing to serve the country once more that drives them to come forward. We have to acknowledge that they happen to also have the political flair of the “how and when” to hitch themselves onto the wagon of the new trend.  And once on board, it is just a child’s game; they leave it to their megalomania and the resonant titles and accompanying privileges to ensure compliance and enforce total submission. We embraced one such guy in 2006 as a reformer and an elite member of the "new breed" of visionary technicians.

 Indeed our “revenant” of yesterday’s interview in l’express is our man from IMF, who was given the opportunity to walk the talk as Financial Secretary from 2006 to 2013. Unfortunately, his “bilan” tells another story that does not match the talk or the vision.

In his interview, he quotes Winston Churchill in the context of the  importance of taking advantage  of a crisis  for a change in paradigm- “Ne laissez jamais une bonne crise se perdre.” He did not ,however, walk his talk. We lost a historic opportunity. He failed to use the 2008 financial crisis to push for bold reforms. He preferred to kick the can down the road, ducking major decisions and it was just plain old statist thinking for his seven years at MOFED. We did not really go through the pains of restructuring – the painful changes involved in improving competitiveness and ensuring cost-effectiveness in education, health care, the public sector, social security and pensions. He and his team preferred the easy way out – some few touches to the tax rates and some improvements to the investment climate framework.

He is now sermoning us on the deteriorating indices of governance and competitiveness. Again, he did not walk his talk; the nexus between business, politics and cronies was equally rampant then, though to a lesser extent than it is at present. The supposed democratisation of the economy was enriching only cronies and some specific conglomerates through allocations of licenses, land, contracts and special deals. Every other day, the local press was fraught with “allegations” of the nexus between politicians, business groups and cronies. We had the case of a leading conglomerate and life insurer involved in unsound related party transactions which was propped up and given a license under the Banking Act by BOM. And the banking Act was later amended to allow it to lend to its related companies. Much beyond insurer solvency, the same process was repeated again and again in other sectors/areas/projects like the biometric ID card, CT power, Air Mts (hedging saga), stimulus packages (to doubtful lame enterprises), the purchase of Microsoft software licenses and the purchase of aircrafts.  It was the same venal system that we are confronting today -the emergence of a new breed of oligarchs in an environment characterized by governance and ethical deficits and where connection trumps competence, and money supersedes merit. 

On competitiveness, the "bilan" was even more than catastrophic. For 8 consecutive years, we registered large and persistent current account deficits well above the sustainable level. Between 2006 and 2013, the exports of goods and services-to-GDP ratio fell from 58.4% to 48.4 % while the exports of goods fell from 33.2% to 23.6% over the same period. Moreover, we did not make much progress in either the diversification of our export basket or in the destination of Mauritian exports. A study carried out by the IMF in 2011 revealed that the low level of sophistication of our exports  has not changed much since 2004-05, signalling a slow-down in innovation and expansion into new industries. 

 You could see that there was a penchant for short-term fixes and band-aids, treating symptoms rather than the disease. They deliberately chose to make the economy more vulnerable by increasing its dependence on short-term, risk-driven volatile and unproductive capital inflows while ignoring the worsening current account deficit. They relied on the quick fix of opening up the taps of capital inflows in the real estate sector (FDI in the real estate sector, as a proportion of total FDI, had increased from 23.5% in 2006 to 60.8% in 2012), and failed in instituting crucial  structural measures to bring the current account deficit to sustainable levels by fostering competitiveness through structural reforms, and by investing in physical and human capital, which is critical for longer-term growth prospects.

As for institution building and strengthening -“mettre en place de bonnes institutions et prôner le professionalisme”, we did not fare better. The financial sector saw a series of financial scams and crackdown on unlicensed investments . While the public was anxious to understand the reasons for these shocking scandals, our financial high priests from the BOM and the FSC were pinning the blame on each other. The distortions and inefficiencies in the financial system were a direct result of the lack of reforms in the sector and the absence of effective enforcement of existing legislation and the  education of the public on dealing with unlicensed entities. The exposed crooked schemes, that included the setting up of car rental companies and pizzerias, showed that our anti money laundering legislation had failed to provide an immediate and effective response to addressing financial crime. And since then it has been all talk and talk.   It’s only after the EU backlisting-the inevitable “rotin bazar” - that the sector was shaken out of its apathy, inertia , incompetence and complacency .

Our ex-FS was assigned the specific task of the merging of Planning with Finance with the aim of strengthening the strategic planning capacity in government and a proper mapping of the links between macroeconomic projections, fiscal strategy and ministry-level strategic plans that would have  improved the budget process and the analysis and discussion of macro-fiscal projections and fiscal outputs. After 7 years of prevarication and trial and error, the merger was not realized and when the IMF X-pert left, the MOFED had fallen so low. It was singularly incapable of a proper understanding of the present policy issues, was absent on all fronts, be it the strategic plans of Ministries (MOH for e.g.) or of parastatals (such as the NTC for instance), the Tertiary Education Commission (such as its Open and Distance Learning Policy for instance), energy and food policy, the innovation, diversification or democratization of the tourism sector,the environmentally-sustainable development projects… you name it. This was an important role that the dismantled Ministry of Planning and Economic Development (MEPD) was assuming with brio and authority and also in taking initiatives in policy reforms and advocacy. The MEPD was also giving its views on important policy matters that would come up. Unlike other ministries, it did not have a vested interest and so could be expected to give an unbiased opinion. 

It is only recently that there has been a timid attempt at a genuine “redynamisation” of the planning function in MOFED to enhance the breadth and depth of the policy, leadership and management skills needed at the Ministry and reinforce the capacity of economists to provide strategic policy advice. Only such a redynamisation will provide for an integrated and consistent macro-picture and framework  in allocating public investment and for designing implementation strategies to see that outcomes are realised cost-effectively.

There were also the failures  
• in implementing the  Programme-Based Budgeting (PBB) - a budget management process for enhancing fiscal discipline, bringing efficiency gains, greater accountability  and promoting good governance in a more outcome-oriented public sector.The  PBB  failed to  secure delivery of Government’s major domestic policy priorities.
• to address the underlying causes of implementation delays especially in physical infrastructure.
• at implementing major productivity-driving reforms measures aimed at promoting industrial competitiveness , encouraging innovation and creativity and directed at other key drivers of growth . There was absolutely no emphasis on or priority given to job creation.
• for a more focused prioritized investment expenditure in the economic heart of this country – science, engineering, ICT, technology and innovation –to become a high-skills, high-tech economy.
• to consolidate the budget figures; the off-budget funds (the Special Funds) had to be integrated to the budget to generate  comprehensive fiscal aggregates , ensure greater transparency, reduce budgetary fragmentation resulting in stronger expenditure controls in our public finances, as recommended by the IMF.
• in the evolution of the  fiscal accounts which showed  insufficient capital spending, that was beginning to hurt the current growth potential -- water, power, energy and transport sectors and
• to provide for more fiscal space to meet the priorities which will generate future productivity growth

For these to happen, there was no other alternative but for the Guy to Go . We were not getting value for money disbursed partially in dollars.

CONCLUSION: The IMF is an international bureaucracy that served to preach the dogma of the Washington consensus that is today held partly responsible for a failing world economic order, deep-stricken by a global financial crisis and widening economic inequalities. No wonder many economic experts land up in cushy tax exempt jobs at the IMF. They excel at preaching reforms, not in making real change. The example of this IMF expert turned amateur financial secretary is more than eloquent - slacker productivity and growth, increased inequality, higher external vulnerability, worse budgetary control and accountability, and the emasculation of economic planning and policy making. Under his stewardship in the closing festive days of 2011,  the finance ministry was busy concluding a property transaction (Medpoint) that would have attracted a capital gains tax as from the beginning of 2012. Plus expert economiste bureaucrate que ca, tu meurs.

RChand Corner

Thursday, January 14, 2021

Our IMF man who talks the talk but doesn’t walk the talk !

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