Is our dear Pada so stupid that he cannot make out that behind the usual diplomatic language of the IMF ( this IMF comment “... the economy is gradually recovering from the pandemic” seems to have send our Pada into raptures, overlooking the whole series of prescriptions, recommendations and instructions), there is a severe warning that we cannot continue pumping the economy with steroids.
If we want to ward off further severe distress to our economy and not end up in the league of Lebanon, Turkey, Pakistan and Sri Lanka.... , the IMF demands that we
* Implement a comprehensive fiscal consolidation plan to ensure debt sustainability and normalize monetary policy stance in a timely manner to control inflation in the medium term.
Carry out further fiscal consolidation to restore fiscal space and ensure debt sustainability. (Mauritius’ public debt is set to stay at elevated levels in the medium term. )
* Reinstate fiscal rules, including a medium-term debt anchor, would help preserve fiscal sustainability and reduce debt vulnerabilities, while allowing for flexibility to address shocks.
* Reform the pension system which is a critical step towards fiscal sustainability.
* Improve the effectiveness of monetary policy and safeguard the central bank independence ( the government needs to cover BOM’s losses …. Improving the legal framework and addressing governance issues to allow for further safeguards to the central bank independence.)
*Ensure that the BOM relinquish ownership of the MIC, and avoid quasi-fiscal financing. (BOM’s ownership of the MIC weigh on the BOM’s independence and blur the separation of monetary and fiscal policies.)
*Continue strengthening its AML/CFT regime, particularly as related to non-resident and cross-border activity. (Including supervision of the non-financial sectors, especially of casinos, bookmakers and gambling activities as we are well aware of the symbiotic relationship of the regime with the gambling industry, a gaming mogul and the gambling mafia which has already infiltrated our institutions. )
*Diversify the economy , reduce the shortage of suitably skilled workers and promote greater digitalization and move up the value chain. Addressing climate change is another priority to help the economy build resilience against shocks. These should be supported by a comprehensive reform agenda to identify priorities, address obstacles, and increase efficiency, including by finding complementarities between the public and private sectors
* Protect the vulnerable population with targeted transfers through social safety net programs while avoiding broad-based subsidies benefiting all income levels.
Please note that the reasons given by the IMF for the accelerated year-on-year inflation are the higher fuel, food prices, freight costs, and the depreciation of the rupee. We have not heard much about the latter from our Pada who conveniently shifts the whole blame of the economic crisis on Covid and Ukraine war.
If he had not had recourse to heavy money printing and listened to such advice that “ while quasi-fiscal measures can help reduce debt in the short term, they can delay fundamental fiscal policy actions and lead to renewed pressures in the medium and long term.”, we would not have been in such a mess today.
