Comments on the 2010 Budget in an article titled "Unlocking the Budget figures", dated Dec 2009.
“Analyzing the budgeted revenue figures, we see that for 2010 a receipt of Rs 2.3 billion (0.75 of GDP) is shown as a transfer from special funds. This is an irregular item; it should have been used below the line to finance the budget deficit ; we cannot transfer money to funds and bring them back in the budget as current revenues. We have to net it out of the revenue figures; there is also EU grant money, in compensation for sugar reform amounting to Rs 4.1 billion, 1.3% of GDP, which shows the new addiction and budget dependence on foreign donor funds: The EU grant funds should instead have been kept off-budget. Moreover it is not a result of revenue enhancing measures and is not likely to be a recurrent item. Without these items the total revenue figures is only 19.7 % of GDP and the budget deficit works out to be a catastrophic 6.6% of GDP , worse than in 2005/06, on the basis of the published figures for 2010.
….. All kinds of voodoo accounting have been used to try to hide the poor implementation of infrastructure projects. With the over-taxation of the population, we did not have a revenue problem; but a spending problem - the low capital expenditure as from the first budget. The capital spending for the 2007/08 Budget is Rs 13 bn representing 5.3% of GDP. The Rs 13 bn figure includes the amount allocated to the SIX SPECIAL FUNDS not expenditure incurred…..
The excessive taxation over the first three years –extra revenue of Rs 3.1 billion in 2006/07 , Rs 11 billion in 2007/08 and Rs 6 billion in 2008/09 had created enough of fiscal space for social measures. But the figures show that the money had not been spent on social sectors - health, education or housing.
Extracts from Hansard dated 7th December 2009 on the 2010 Budget:
“Le peuple mauricien a été emporté délibérément dans un tourbillon de chiffres manipulés, d’arnaques préméditées en guise d’apparente mesures sociales et il y a eu les fonds mirobolants portant sur un sensationnalisme rêveur et le tout destiné à faire croire que la politique économique du ministre des finances et du gouvernement vise le bien- être de la population. ….”
"……Le ministre des finances lui-même à une question que j’avais posé avait dit que R 8.4 milliards avaient été allouées aux six fonds qui ont été répétés à plusieurs reprises dans la Chambre et que le déboursement s’est élevé à seulement R 1.3 milliards. Sur R 8.4milliards on a dépensé R 1.3 milliards pour des projets d’infrastructures publiques. "
"….Pour seulement avoir une idée, 2005-2006 : R 13,7 milliards ; 2008- 2009 : R 18,9 milliards, soit une augmentation de R 5,2 milliards en terme de TVA ; pour 2010 il va récolter R 20,6 milliards pour la TVA. …"
…
"…….Et puis il a transféré aussi R 2,3 milliards du Food Security Fund et d’autres fonds qu’il a transférés au budget et les recettes de l’Etat pour 2010 comprennent également …..Donc, moi je dis que le déficit réel s’élèverait à 6,6%, bien supérieur que les 4,9% que j’avais atteints en 2004/2005. ”
The first comments were from V. Bhardwaj, published in MTimes and second one was from Pravind Jugnauth in his intervention on the 2010 budget. In his summing up, Sithanen ridiculed Pravind Jugnauth about the "nonsensical claim " of a 6.6 % budget deficit figure for the 2010 budget..
And in Budget 2011, Pravin Jugnauth , the then MoF, announced that he will be removing some of the opacities about the Special Funds and integrate all these funds that were proliferating all over the place into the budget for better expenditure coordination, accountability and transparency.
But Pravind, as good a bluffer as Sithanen and as one of his good student , was back to the old tortuous accounting ways, flouting the principles of sound public finances and the GFSM 2001 standards -indeed , Pravind and our Pada proved to be ardent followers of Sithanen who had also advised them on helicopter money and was our pioneer in creating funds outside the budget-recall the first National Infrastructure Development Fund -a Floating Rate Note taken on the eve of the 1995 elections that had cost us dearly in terms of massive foreign exchange losses. Our LSE golden boy even came to be known as "L’homme du FRN".
Both Pravind and Padayachy have learned the tricks of deceitful accounting from the master and ended up outperforming the master.
Note that their modus operandi are all the same and the present criticisms of Sithanen seem to be “du dejà vu” - about the billions collected in taxes, the money amassed in special funds outside the budget and crowd-pleasing packages and giveaways, with our own money- pran enn tas dan pos gos, pé retourn nou miettes dan pos drwat- to sway the voter which ultimately turns out to be a damp squid, and no big reform signals to jumpstart the economy.
They make and unmake us, they have power of raising and casting down,….They have power to exalt low things and abase high things, and make of their subjects, like men on a chessboard, -- we are pawns in their hands …we continue to believe them because they are good at fooling us ..See how our journalus flock to them, again and again for the shrill theatrics , the same old gesticulations , the same old tricks.
But let us give the devil his due ; it’s never too late to wake up to the realities of the Special Funds but it is fallacious to say there is fiscal space to spend from the Special Funds balances to support the poor better. That will mean more of government expenditure and a higher deficit. This will feed into the external current account deficit, which he says has reached record levels, and a sign of a country spending more than it can afford. A better suggestion is to use these funds to reduce the level of debt.
Thus this view that there is fiscal space from Special Funds balances feeds the illusion that Mauritius can afford to continue with high spending. To better support the poor requires adjustment in other spending; unless we realize this, the rupee will keep depreciating, and inflation rising, like it did in FY 2006-7 at 10.7%
