Our comments(Rattan &Sushil) : In its public debt data for end-June 23, it appears that the Ministry of Finance has arbitrarily added Rs8 bn to GDP for 2022-23, just to show a reduction in the ratio of public debt to GDP to below the 80% level. Furthermore, without an artificial adjustment to reduce public debt, the debt ratio would reach 84% of GDP.
In the 2023 budget, GDP for fiscal year 2022-23 is estimated at Rs614 bn. Public sector debt data recently released by the ministry of finance is however based on a higher GDP estimate of Rs622 bn for 2022-23. At end June 2023, gross public debt stood at Rs496 bn, and the public debt ratio at 79.7%.
However, GDP for 2022-23 is overestimated. A GDP figure of Rs622 bn for 2022-23 means that GDP for the Apr-June 2023 is higher than in Apr-June 2022 by over 25%. Assuming a more reasonable increase of 18% would result in a GDP figure of Rs614 bn, as estimated in the 2023 budget. On the basis of this revised GDP estimate, the public debt ratio at end June 2023 would stand at above 80%.
Govt engages in further data manipulation by artificially deducting an amount of Rs17 bn from public debt in June 23, referred to as “consolidation adjustment in respect of Govt securities held by non-financial public sector entities”. These holdings of Govt securities stood at Rs15 bn at June 22, mainly reflecting investments of Rs12 bn by the Covid Project Development Fund (CPDF), in 182-day Treasury certificates. Covid PDF is estimated to hold the same amount of invested cash balances in June 23.
Recent annual transfers were made from the Govt budget to CPDF to finance public expenditures, such as the implementation of the 12,000 Social Housing Project and the National Flood Management Programme. These transfers have remained largely unspent, leading to an accumulation of cash balances. The investment of these cash balances by CPDF in Treasury certificates is deducted from public debt, as a consolidation adjustment.
This is not in line with the recommended IMF methodology of Govt finance statistics. The public debt data published in IMF reports on Mauritius do not account for any such consolidation adjustment. The consolidation adjustment being made by Govt to public debt represents cash balances that are earmarked for specified expenditures, and not free for investments except on a very short-term basis. If no longer meant for expenditures, cash balances could be transferred back to the budget and used to repay debt. By deducting these invested cash balances from public debt, Govt is in effect computing a figure for net and not gross public debt.
Ignoring this concocted consolidation adjustment, gross public debt in June 23 stood at Rs513 bn, or 82% of GDP. On the basis of a lower and more realistic GDP estimate, the public debt ratio was 84% of GDP. The public debt to GDP ratio declined from 89% in June 22 to 84% in June 23, as shown in the table, mainly due to inflation, and not to any serious effort at fiscal correction. Without an amount of Rs25 bn extended to Govt by Bank of Mauritius/MIC, through Airport Holdings Ltd, gross public debt at June 23 would be Rs538 bn, or 88% of GDP.
