(Published in l'express of 2nd Nov 2021)
Why is the PRB award a futile and onerous exercise.? Let us examine some of the issues pertaining to the PRB at these three levels : a) Compensation for improved service delivery? b) PRB: An outdated institution! and c) Financing the PRB and the wage-price spiral
a) Compensation for improved service delivery?
The PRB award is a combination of compensation for the loss of purchasing power and for the improvement in the productivity of the public sector worker. We have to examine the rewards of government workers vis- à -vis their output or their service delivery. So the discussion should not only be focusing on what it costs to the economy or the taxpayer but whether the compensation to the civil servant relative to his improved productivity is excessive or not? Does he deserve it?
Yes, it would have been easier to justify it if MOFED had not debunked the Programme or Performance Based Budget (PBB) for what is now just an approximation, a spurious imitation and a mere soupcon of a real PBB. The proper implementation of a budget management process that links allocation of public resources to clear outputs and agreed outcomes, and provides a framework for reporting on results would have meant a shift in the whole public sector from a culture of administration to a culture of results. The 2010 Public Expenditure and Financial Accountability (PEFA) assessment, had encouraged us to continue our efforts in improving our still embryonic PBB which was starting to show good results against many of the PEFA benchmarks.
The Director of Audit had also noted several areas of progress in the implementation of the PBB reform and encouraged us to move ahead with the stabilization of the budget presentation format and recommended a greater ownership of the process by line ministries ( as opposed to our top-down and MOFED’s centric approach) which would have led to a wider understanding of concepts like outcomes, services to be provided (outputs) and service standards (indicators), and improvements in programme costing.
Both the IMF and CABRI (Collaborative Africa Budget Reform Initiative) also provided crucial inputs to our still rudimentary Progarmme Based Budgeting which would have made a noticeable impact on budgetary processes including flexibility and ownership, better resource allocation, performance orientation and transparency. They also submitted recommendations on how to consolidate the PBB process and further develop the monitoring and evaluation of service delivery in relation to spending.
The PBB, by providing performance information on service standards through the Key Performance Indicators –KPIs- of the ministries/departments for their budget programmes, helps us to assess their service delivery (in realising their KPIs and in the execution of the budget measures), supported by a dedicated unit for the reporting, monitoring, evaluation and implementation facilitator/delivering system -a function previously performed by the earlier Ministry of Economic Planning and Development (MEPD). We would then be able to safely assess whether such and such teams of the ministries/depts have been on target in terms of service delivery and thus recommend that their improved performance be aptly rewarded by the PRB.
We were moving up the learning curve and there were many flaws and shortcomings in the implementation of the PBB. The PBB approach should have been thoroughly reviewed, but it should not have been jettisoned. PBB, when properly implemented with an effective monitoring and evaluation process, does confer greater accountability and transparency to fiscal management and helps us to build a more performance-oriented civil service. The PBB would thus have provided a basis to justify the PRB awards relative to the service delivery / productivity of government workers.
b) PRB-an outdated institution
It is time to do away with the Pay Research Bureau. The country needs a more up-to-date National Resource Commission (NRC). An NRC would be able to intervene to re-allocate our resources giving a new orientation towards realising our vision of a more services-based knowledge hub or any other hubs that are more fashionable these days. This means that we should be privileging first of all teachers (especially scientists) not administrators –in Germany and Finland, the best elements usually join primary and secondary teaching- and agronomists , ocean-economy specialists for e.g, researchers, IT , AI and the science-oriented professions.
The more crucial and the riskier the jobs the higher the salaries or the allowances- special allowances for the policeman on patrol and for those carrying out special risky duties and the greater the need for innovation and creativity needed for a job, the higher the pay packet- IT programmers, lecturers, scientific officers and researchers etc. In specific areas of specialisation , we have to offer them hefty pay packages if we want to palliate to the lack of AIs, neurosurgeons, geriatricians etc.
C: Financing the PRB and the wage-price spiral
Govt has three options to finance the PRB which will require additional expenditure of Rs 6.5 bn in 21-22, including the Rs12.5 bn allocated to Air Mauritius and the announced wage support for the tourism sector-some additional resources of about Rs 20 bn in 21-22.
Option 1: Reallocate existing expenditures - either budget expenditure or expenditure from special funds. Special Funds(SF) had surplus balances of Rs35 bn in June 21, which is expected to fall to Rs20 bn in June 22. Govt can use these surplus balances to fund additional expenditures. But SF balances are also required for capital expenditures in 22-23, e.g. Rs 4 bn for housing construction subsidy, Rs3.6 bn for flood management programme, and some Rs 4 bn on other capital projects, all from the Covid Projects Development Fund. This means these projects will be curtailed or discontinued in 22-23.
Option 2: Borrow. This will increase public debt which is already too high. Moody's downgrade is looming.
Option 3: Raise taxes.
Govt should make clear to the population the way it is going to finance the PRB, as well as the loan to Air Mauritius. This is use of public money. THE PUBLIC HAVE A RIGHT TO KNOW. Will it be a mix of all three options above: cut Budget and SF capital spending mostly, then borrow the balance, and last raise taxes. ? Or will the cost of the PRB fall on capital spending mainly ?
Please note that with the latest figures show that the monetary base continues to explodeby some 76%(August year-on-year growth figure), which accompanied the huge depreciation of the rupee fanning the flames of inflation- the hike in international commodity prices and freights- to unacceptable levels, I doubt whether all these irresponsible wage and pension policies combined with the budget 2021-22’s boost in non-prioritised and unproductive capital spending will not be pushing the country into a spiral of higher inflation and interest rates and falling economic growth. (Currency depreciation is required to offset a decline in external competitiveness. It is not a deliberate policy choice on its own, but an inevitable consequence of productivity gains lagging real wage growth. Currency depreciation is less effective today than in the past because we no longer have the labor force for labor intensive export activities, and our economy is more diversified towards services. Hence the need for greater focus on productivity gains than simply relying on currency depreciation to offset wage increases. A strong rupee, on the other hand, did not lead us very far, and was incompatible with our continuing offer of low value-added export products and services, such as the basic all-inclusive tourism formula. This is a simple version of the middle income trap - how to move the economy to a higher productivity and income level.)
For many, the concerns of seeing inflation reaching gale force or the concerns of the common man can take a back seat.
But mind you, rising unemployment and increasing food inflation will not only be hurting the common man, but will also be creating economic instability which may even lead to political disruption.
