RChand Corner: A severe but well-deserved rap on the knuckles from the IMF.

No more of dubious arithmetic or colourable accounting, by MOFED and the BOM, to hide their irresponsible policies !!! 

Our helicopter money, the Rs 60 billion, which was categorised as "Accounts Receivable" in the Central Bank's  Balance Sheet ,meaning  it was totally money printable,  has been toned down by the IMF. Now part of it-Rs 32 billion- is being taken from the Special Reserve Fund and the remaining Rs 28 billion will have to be  treated as advance against future profits distributable to Government. 

What is even more humiliating is that IMF is not recommending that we amend  the Central Bank law ! It does not trust us anymore ; it's instructing us to  reform  the CB's law to preempt further exceptional transfers to the government.  This shows  how low we have fallen in terms of credibility in the eyes of the IMF.

They specifically mentioned that we need to restore  the central bank’s credibility and  build up of an effective monetary policy by moving towards monetary policy normalization.  We have to rue the day when we  allowed these " amateurs"-chokras- to take over such a prime institution and gave them  carte blanche to gamble with our fundamental policy instruments.!!!

Indeed , as we have often argued, our version of "helicopter money" undermines the CB's monetary policy effectiveness, its ability in controlling inflation and the depreciation of the rupee.

 In addition, "the mission recommended that the central bank should relinquish ownership of the Mauritius Investment Corporation (MIC), and financing of the MIC should be provided through the budgetary process."  

It seems that the IMF had been giving the directives for quite some time, may be as early as December or January, much before the second wave. The recent attempt at fiscal consolidation must have been pursued following the discussions with the IMF as stated in the IMF End-of-Mission press release:
"The government should prepare plans for fiscal consolidation to stabilize debt in the medium term once Mauritius has firmly emerged from the pandemic to preserve fiscal sustainability and build buffers given the substantial increase in public debt level, which is likely to exceed 90 percent of GDP in the wake of the crisis."

The IMF often uses its own traditional coded or diplomatic langauge to stress a desired  policy direction for e.g  the need for  more of prioritized and targeted expenditures and expenditure control by the authorities.  The mission recommended “prioritizing programs that are consistent with medium-term development needs and broader social and environmental goals, such as digitalization, inclusion, and climate change mitigation during the recovery phase." 

In more straigtforward terms , the IMF meant that it’s time that Govt realises that we cannot continue with the glitzy infrastructure projects or prestige projects  like Safe City, Cote d’or Sports complex, ..or extension of Metro Express to the PM’s constituency, and  more of Urban Terminals( in a situation of excess of commercial space) at eye-watering cost to the taxpayer while the welfare of ordinary people  was neglected.  

In simple terms, it means that we have to shift the focus from glamorous infrastructure projects to more cost-effective ones and to  simply reducing the delays in getting projects off the ground, and most importantly, we have to put a stop to the vandalization of government coffers, with or without emergency procurements.

A note to our Governor of the CB: 
You should acknowledge your misguided attempts to obfuscate monetary policy. Proponents of "helico money " should think twice before recommending any new measures , like that uninspired and misguided concoction ,the MIC. As it has been correctly highlighted  by the IMF, the MIC conflicts with monetary policy effectiveness, and should belong to the fiscal domain. This will also ensure better transparency and accountability

What about the big  scheme of raising funds -Rs 60 billion-from the market! The CB had even issued a communiqué promising to raise the funds through open-market operations. It was mere bluff.  You lied to us ;  one  by one, our institutions are being infected with toxic polarisation and sapped by the chums that are taking over these independent institutions. We had hoped that at least this well-functioning, trustworthy and independent  instititution will hold the fort.  Unfortunately, faith in its authority, credibility and independence is gradually being eroded. This is of your own making, Sir.
If you cannot restore the CB's  credibility, it is better for the proper functioning  of this prime institution, that you "tuit" , along with other directors of the BOM's Board.
https://www.imf.org/.../pr21125-mauritius-imf-staff...