Why do Maldives ( 2.9%), Seychelles(3.0%) ,Singapore(6.7%) and South Africa(7.6%) for e..g, have less inflation than us (11.9%) ?
( Just our year-on-year core inflation, which excludes gas & other fuels ,among others, stood at 7% in October 2022.)
Because, despite our warnings and concerns, they persisted in amending the BoM Act to have recourse to (a) exaggerated money printing making a total mockery of the conduct of monetary policy and independence of the BoM, (b) the BoM’s Special Reserves Fund (SRF) impairing the Bank’s capital, (c) continued rupee depreciation to raid the exchange valuation gains of the SRF and (d) bloated budget deficits and elevated levels of public debt to continue with their populist policies and prestige projects .
Thus, with such an incompetent management of the economy, Moody’s downgrade was inevitable and the country has now become more exposed and vulnerable to future economic shocks.
When we have such irresponsibility, such incompetence, such lack of understanding, such "tyranisme", "sa kalité coquin" et cronyism, "Lepep pou finalemant fer la queue pou fer la grève la faim! Si mo mem mo ti ena inpé pli kouraz, mo ti pou avek Nishal !"
Pada's fake excuses that all these exceptional measures, in exceptional circumstances, were needed because of the Covid pandemic and the unprecedented -14.6% of economic downturn do not hold .
No other central bank adopted such an overt money financing ; the South African Reserve Bank (SARB), for example, bought more Govt bonds on the secondary market and resisted calls to fund or purchase bonds directly from Govt. In terms of SARB’s legal framework, it is not permissible for SARB to lend directly to the government or to print money to finance the government deficit.
Yes , there were less perilous alternatives to Govt's money creation policies. Mauritius could have implemented a more conventional monetary policy, by lowering interest rates even further and providing more interest-free liquidity to support bank lending to households and business. There was plenty of excess liquidity in the banking system, and Govt could have raised funds by borrowing more from banks. Govt could have mobilized resources at exceptionally low-interest rates from the public through issues of long-dated bonds.
In addition, Govt could have raised external finance from international financial organizations, development partners and other friendly countries. Tapping World Bank support and IMF emergency assistance under its Rapid Financing Instrument could have brought additional resources. That’s what Maldives and Seychelles did.
The Maldives Monetary Authority (MMA) reduced the minimum required reserves (RR) up to 5 percent, made available a short-term credit facility to financial institutions and introduced regulatory measures to enable a moratorium of 6 months on loan repayments for those impacted by the Covid situation.
The MMA also increased its foreign exchange interventions and used other available facilities to maintain the exchange rate peg against the US dollar.The Reserve Bank of India extended foreign currency swaps support, totaling US$400 million, to the MMA on April 28 and December 29, 2020, under the currency swap agreement framework signed between the MMA and the Reserve Bank of India in July 2019. The IMF Executive Board approved a US$28.9 Million Disbursement to the Republic of Maldives to address the COVID-19 Pandemic
The Central Bank of Seychelles (CBS) adopted a new QE policy "to buy back and resell Govt securities", with a statutory amendment for CBS to purchase Govt Treasury Bill and Govt-guaranteed securities up to prescribed limits. The National Assembly allowed the Central Bank to provide a limited credit to the government up to SCR 500 million, or 2.5% of GDP, preferably through the purchase of securities. Seychelles obtained IMF emergency assistance to meet its balance of payments and budgetary needs.
Sameer’s comments :
What is interesting and sad was a comment from the institution that is the prime minister that spoke about Guinness book of world records. Not only does it showcase a lack of understanding of science from the top but it shows a complete disregard for human life. Mauritius needs to cut wasteful govt spending including raja perks to ministers, rationalize the tax system away from just focusing so much on consumption taxation, stop giving subsidies to everyone and move towards the targeted support system. This country is being run by the rich for the rich and wealth inequality is rising.This country has a moral problem. All those who benefit from the political patronage system are conflicted between truth, morality and their personal interests.
