The budget outcome for 2020-21 will likely be determined by the following main factors:
1. A sum of Rs 5bn from BoM will supplement Govt other revenue. In 2020/21, BoM made a contribution of Rs60 to Govt, but the Govt audited accounts show only a receipt of Rs55 bn in 2020/21, with an amount of Rs5 bn held on deposit at Bom. It is probable that the deposit of Rs5 bn will be used to finance the budget deficit for 2021/22. Taxes and Revenue have recovered fairly strongly, mainly on account of VAT, and the BoM contribution of Rs5 bn but will reflect a shortfall of some Rs 7 bn.
2. In line the latest data as at April 2022, capital spending, or net acquisition of non-financial assets, will be sharply curtailed to only about 50% of the budgeted amount, representing a sizeable capital expenditure cut of Rs7 bn.
3. An effort has been made to restrain current expenses, which are expected to exceed the budgeted level by only about Rs3 bn, mainly on account of the PRB wage increase. Some current expenses on Covid related wage and employment subsidies have also been made from special funds, instead of the budget.
The shortfall in budget revenue will be matched by a reduction in capital spending, and the slight increase in current expenses will lead to a budget deficit of slightly over the budgeted amount of Rs25 bn, or 5.6% of GDP. (GDP is roughly estimated at Rs500 bn in 2021/22).
However, this budget forecast needs to be adjusted as follows:
1. The BoM contribution of Rs5 bn to Govt is not a revenue but a financing item, which widens the deficit by 1% of GDP.
2. Other revenue includes about Rs6 bn of income from quasi corporations, like the CEB, FSC, etc. According to the IMF Manual on Government Finance Statistics, this is not treated as revenue but as withdrawal of equity, and therefore implies a higher deficit by 1.2% of GDP.
3. Special funds also undertake Govt expenditures, including on wage and employment subsidies, as well as capital spending. There is no current data available for special funds. The budgeted transfer of Rs8.5 bn to the Covid Projects Development Fund (CPDF) was not effected by end April 22. In May 22, an additional supplementary expenditure of Rs2.5 bn was voted for flood management by this Fund. It can be assumed that a total amount of Rs11 bn will be transferred to the CPDF by June 22. Assuming that expenditure from special funds, mainly the CPDF and the National Resilience Fund match the budget transfer to the CPDF, the deficit on special funds would be zero, while special funds will still hold a balance of about Rs35 bn at end June 22.
The overall budget deficit, after adjustment for BoM contribution and the income from quasi corporations is thus estimated at around Rs40 bn, or close to 8% (5.6+1.0+1.2) of GDP. This does not account for (i) the off-budget bail-out costs to creditors of Air Mauritius financed by BoM for about Rs 12 bn, or 2.4% of GDP, and (ii) additional equity investments in the National Property Fund for the National Insurance Company, representing additional BAI bail out expenses of Rs2.4 bn, or 0.5% of GDP.
The true budget deficit would thus exceed 10% of GDP.
