All concerned economists , analysts and international agencies, including the IMF and the WB, were expecting a thorough reform of our pension system that would be setting the level and the gradual increase of benefits in a fiscally sustainable manner, while ensuring equity between public and private sector employees and freeing resources for more of pro-poor spending.(The recent WB’s CEM affirms that the targeted measures under Marshall Plan Social programme generated a more equal distribution of income and was superior to untargeted transfers because they could achieve the same degree of poverty and inequality reduction with fewer resources. Precisely, the same decline in the Gini index could be obtained by spending only 29 percent of the current BRP expenditure if it was targeted to the poor.)
The increase in pension spending will be costing more than 8 percent of GDP by FY2023/24 and will greatly exceed pension revenue. The recent IMF Art IV report points out that "the new pension policies will leave Mauritius’ pension spending relative to GDP near that of median pension spending to GDP of the OECD countries. By contrast, Mauritius’ tax revenue to GDP is near the bottom of OECD countries."
Moreover, replacing a funded pension scheme by a pay as you go system dependent on the vagaries of Govt spending is probably one of the most retrograde policy measures taken by any country. It shows how desperate this Govt is for financing its runaway spending. The contributions under the new pension system are credited directly to Govt revenue for budget financing. Govt could have at least allowed the pension contributions to accumulate in a fund, as for the NPF, and lend money to Govt through investments in Govt securities. But, that would mean paying pensioners an interest return on their pension money. Instead, Govt wants to make it crystal clear that the new pension contributions are equivalent to a payroll tax. This new pension system is simply a means of milking the mauritian taxpayer for unaffordable govt spending.
Thus, instead of a carefully targeted reform of our pension system, our politicians have preferred to listen to their populist minds rather than their financial heads. We are not surprised; bribing citizens with their own money-their future liability- has proved to be quite rewarding in the short-term - one of the main factors for the quick wins in the last 3 polls- but costly in the long run.
Yes, in the long run, all available figures show that the Contribution Social Généralisée (CSG) , like the NPF, will become unaffordable as a growing cohort of the population lives longer supported by a smaller ratio of people in the working population. It will become an “absurd monstrosity” that the government wouldn’t be able to afford as the country experiences a rising share of pension recipients as compared to the contributors; it is our children or grandchildren who will pay the price.
But “In the long run we are all dead”, who cares about the long run ?
Not the worker; 80% of employees will benefit more from the new pension system. For them " la CSG est une taxe basée sur la solidarité "; that the NPF contribution better promotes a savings culture is important for macro economic stability but immaterial to the layman. The public is myopic and cares only about the short term. Maybe by telling them that their children and grandchildren will eventually bear the cost of today’s higher retirement benefit can influence their thinking, but i would not bet on it. They will want to believe that only the heirs of the rich ones ,of the 20% ,who will pay.
Not the population aged 60 and older, currently 16.8 percent of the total population, which is expected to reach almost 25 percent by 2030, benefiting at the cost of the younger generation and being provided with quite an incentive for early retirement.
Not the public servant , whose contribution is being doled out by the state-public money paying for public employees.( the private sector employees subsidizing the pension for civil servants). As regards the point on public/ private sector discrimination, some might even welcome the hue and cry about this to shore up their political strength.
Not this irresponsible govt ! Rue the day when we gave them carte blanche to gamble with our future!!!
This regime is very much aware that their populist measures did deliver , not in terms of containing the elevated levels of the budget deficit or public debt or in getting the economy out of the trough , but in scoring quick wins at the last elections and they are likely to stick to the same economic philosophy as long as it is able to ward off the day of reckoning some two to three years down the road with the hope that by that time, the global and local economy would have perhaps picked up and would bring in some badly needed relief and it will be time for the general elections.
You will have your metro, new drains, more of Safe City IVS cameras(sic), a flood of South African investors carving out new enclaves like the one at Tamarin...your PRB and your Rs 13,500 and an opposition still groping in the dark to find some “espoir au sein de la Plateforme du désespoir “. Can we have a better recipe for disaster- "short term political gains for long term economic pain"!
