Pada’s hoodwink !

In his reply to a PQ on the MIC, the Minister states the following to hoodwink the population into believing that MIC was set up by other means than by BoM money printing:

"Grace a ses interventions régulières sur le marché intérieur d’échanges au début de la pandémie dans le but d’assurer les conditions d’un développement économique ordonne et équilibre, la banque de Maurice a investi dans le MIC le produit en roupies de ses interventions, soit Rs 81 milliards."

This is a gross mistatement. Whenever BoM sells forex on the domestic market, there are no rupees available for investment. Say BOM sells USD 1 mn to a bank, the bank’s rupee reserves held at the BoM are simply drawn down by the rupee equivalent of USD1 mn, or Rs45 mn, in payment to the BoM. That is, the BoM’s liabilities to the bank are reduced by Rs45 bn. The BoM’s assets forex assets decline by the same amount. There are no rupees available for investment in MIC or anywhere.

The amount of Rs81 billion transferred to MIC is the result of money creation by BoM, not the fictitious product of forex sales.

Our poor Pada has to go through all kinds of divagations to try to hide the fact that it’s such money printing via MIC that has impaired the ability and credibility of BoM to counter inflationary pressures and has thus landed us in a cost-of-living crisis.

When it suits him, he leans on the IMF to justify the creation and expenditures of the MIC by pointing out that IMF in its revised forecasts had raised our 2022 growth rate by some 36%. “….dans le dernier rapport du World Economic Outlook d’avril 2023 où ils ont amélioré notre croissance économique pour 2022 par 36 %, cela veut bien dire que quelque part, à ce moment noir de notre histoire économique où nous étions au plus profond du chaos, nous avions pris une bonne décision en créant la MIC. “

Our Pada does not seem to be aware that the healthy growth numbers of 2022 are slightly deceptive given the low base effect . Statistics Mauritius own upward revisions of GDP growth for 2022 have been accompanied by successive drops in the growth figure for 2021.

But it is what Pada omits in his reply that is of consequence. While other countries are cruising ahead, here it is taking us three years to catch up with 2019. The GDPmp in 2022 was still 96% of the 2019 real GDP. And Govt had little to do with the growth surge in 2022. Consumption picked up from 2.1% in 2021 to 3.8 % in 2022 and tourists were coming back in numbers more or less in line with the global trend, though we still have a lower expenditure per tourist than our competitors.

Indeed, Government policies had nothing do with it . Public sector investment as a % of GDP at market prices had dropped from 5.2 to 3.9; In real terms, Public Investment in 2022 was still around 67% of the 2019 level. Though exports of goods was showing a high 15.6 % growth , in real terms it was still 5 % lower than our 2019 level of exports. More worryingly , net exports of goods & services as a % of GDP at market prices had deteriorated from -7.2 in 2019 to -6.9 in 2022 and the Current Account deficit has more than doubled to some 12% of GDP in 2022.

When he is questioned about IMF’s recommendations that BoM relinquish ownership of the MIC, he now finds that IMF is wrong and he quotes from a more convenient source , the UNECA report

“Containing inflationary pressures is vital to protect the poor and non-poor from falling into poverty. Central banks in Africa currently have a major challenge in balancing the trade-off between preventing inflation and promoting growth. Responses that emerged due to recent crises could be sustained and scaled up. For example, the Bank of Mauritius created the Mauritius Investment Corporation in June 2020 with seed capital of $2 billion. It proved to be a decisive tool in safeguarding the financial sector and protecting livelihoods by creating a domestic investment portfolio and by providing critical financial support to large corporate organizations during difficult moments. The Corporation ….helped to maintain financial stability and mitigated the impact of downturns in key economic sectors.”

Actually our Pada and the BoM boy are failing in meeting some of the very views/observations of this extract in the sense that

• Our central Bank has failed to balance the trade-off between preventing inflation and promoting growth. There’s already incipient anger all over the country over the rapidly rising cost of living.

• Instead of really protecting livelihoods or creating a profitable investment portfolio for the future , it was “privatizing profits and socializing losses” of corporate friends and capturing a large chunk of the allocated Rs 49 billion for themselves-Rs 25 billion to AML- and for cronies-les Gopees and Zouberrs. Is this how we safeguard the financial sector ? (Sic)

• It has not mitigated the impact of the downturn in key economic sectors. On the contrary , we have a debt burden that is hung like a sword of Damocles over the country -a Public sector debt of 89 % of GDP. That’s the end result of our money printing , creation of MIC and other such irresponsible policies.

• Prakash Neerohoo

  Our MOF is a great illusionist who sells illusions to people. Expert in creative accounting, he treated Rs 55 billion transfer from BOM to Consolidated Revenue Fund as revenue instead of loan (liability). He wants us to believe now that Rs 80 billion transfer to MIC came from forex gains. He lauds and criticizes the IMF when convenient. His economic growth numbers keep changing.

  

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• Sameer Sharma

  Mic is plain money printing. Any other opinion would be misleading. Rightly said. We are the only banana republic with twin deficits that has a sovereign wealth fund, that too via money printing and that invests locally. We are a laughing stock. I can assure you.

  

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