7.4 % YEAR-ON-YEAR INFLATION IN JANUARY 2022.
(Unofficially it is much higher)
We had been warning them !
Back in October 2020, we had commented that ”as the country plunges into recession with rising unemployment and a rapidly depreciating rupee fuelling inflationary pressures, and our exports of goods and services failing to pick up, the country stands the risk of diving into stagflation which will pose one of the biggest economic challenges for recovery. Indeed, with our elevated levels of budget deficit and Public Sector Debt (one of the worst in Sub-Saharan Africa) and the present irresponsible populist policies, Mauritius seems to be taking the road to stagflation. Getting out will be another herculean task.!!!”
The lies and fake arguments of Payadachy:
a) While our Pada was publicly showing great satisfaction that the inflation rate, being in the range of 2.5 to 2.8%, was reasonable for a middle income economy, we had warned that very soon it will be melting away .....
b) In November 2020, our Pada was insisting that “En tant que gouvernement responsable, avec une pandémie, nous avons utilisé toutes les recettes disponibles à travers le monde et nous avons utilisé, oui, le quantitative easing parce que c’est ce qui se fait à travers le monde, en particulier dans les pays avancés. Donc, pourquoi les pays avancés peuvent l’utiliser, et là, il n’y a pas de critique de la part du FMI,et nous en tant que pays en voie de développement, on n’a pas le droit d’utiliser ce genre de mécanisme parce qu’on est un pays en voie de développement”
We had argued that” We, instead of QE, we have had recourse to an extreme form of monetary policy -money creation or printing money by crediting Rs 60 billion to the Govt’s account at the central bank . The central bank can thus print money for Govt by just adding an entry on the asset side of its balance sheet, or, by holding a zero-coupon non-repayable or perpetual bond issued by Govt. Spending by the Govt will thus inject this money in the financial system.
IMF disapproved of our UNCONVENTIONAL FINANCING MEASURES; they cautioned us that “the monetizing of deficits risks undermining the long-term independence and effectiveness of the central bank, since concerns may arise about its ability to keep inflation under control in the future. This would unanchor inflation expectations and add to pressures on the currency like in Zimbabwe.”
c) Payadachy was lying about the budget deficit, trying to fool us with such statements “ le déficit budgétaire devrait s'élever à 4,1 milliards de roupies ce qui représente seulement 0,9% du PIB. En ces temps incertains, le déficit que nous prévoyons est l'un des plus faibles au monde. En comparaison, la France a récemment révisé …….” ; we had shown that the consolidated budget deficit as a % of GDP was -11.3 for FY 2019 and -15.7 for FY 2020 as compared to the EMMEs where the average level of the overall fiscal deficit was -4.9% of GDP for FY 2019 which was expected to widen to -10.7 % of GDP in FY 2020 and for the Sub-Saharan African countries, the average level was -4.2 percent in FY 2019 and was projected to be - 7.6 percent of GDP in FY 2020 for the region as a whole. In Sub-Saharan Africa (SSA), we were thus ranked as the worst performer in FY 2019 and among the top three countries that registered the highest fiscal deficits in FY 2020.
Our comments at that time were that “these figures were showing that we entered the COVID-19 crisis with significantly less fiscal space and this had hampered our capacity to raise additional spending to mount a better crisis response without having recourse to money printing policies that risk derailing the economy through accelerated depreciation and inflation and even jeopardising the recovery and affecting social stability.”
And till recently, we had continued highlighting that with the accelerated depreciation of the rupee and the significant upward revision in inflationary expectations -and as pointed out by the IMF-the Central Banks, with limited credibility and poorly anchored inflationary expectations, may find themselves constrained in their ability to use monetary deficit financing without adding to inflationary pressures.
Conclusion: To meet Govt deficit financing needs, BoM has totally surrendered its independence and responsibility to fight inflation.
And we – le petit peuple- are already being impacted by the foul amalgam of a depreciating rupee, the spectre of inflation reaching gale force and economic distress.
And a distinguished commentator had added the following , which we consider even more relevant today – “Avek ban Zeni dan Statistics Mauritius et Sandya …dan Standards Mauritius, et zourlanus ki gobe tou san question, et politiciens ki blaguer ki zot p 'control' inflation, we are well and truly being fucked, as the English would say!”
We will add , with Pada’s Mugabe model at work, indeed, some difficult days ahead !
