Our observations are that the assessment, views and figures of the 2024 IMF Article IV consultation report differ markedly from that of the Mauritian authorities - - On GDP growth , on both primary budget deficit and the overall budget deficit , on the major contingent liability risks to Govt, on the gradual fiscal adjustment scenario to reduce the public debt -to-GDP ratio to 65%, on CSG, on ownership of MIC , on the quasi-fiscal operations, on the extra-budgetary special funds(ESFs), on the monetary policy stance at end 2023, on public finance management, on the escape clauses in the new public debt ceiling legislation and on the need for prompt adoption of amendments to the BoM Act…..
In the same interview, Pada again overdoes when he brags that ….”Je crois que la baisse du ratio de dette publique sur PIB depuis 2021 parle d'elle-même. Ce gouvernement a mis en place une stratégie de consolidation fiscale qui fonctionne, en misant sur une croissance robuste et inclusive.”
Que du bluff ! there has been neither a strategy nor fiscal consolidation. The consolidated budget deficit has been increasing from 5.0% of GDP in FY 2022/23 to 7.5% in 2023/24 and is projected to be around 6.5% in FY24/25
It’s true that the Public debt to GDP ratio has decreased from 96% in June 2021 to around 80% in March 2024.
How has our Pada achieved that ?
1. By inflating debt away: He has been able to inflate away debt by ‘engineering' a higher inflation. Thus part of the reduction of the public debt/GDP ratio is the result of the substantial increase in nominal GDP due to higher inflation and the GDP deflator. It is not the result of any efforts by the government. The higher inflation is principally of his own making.
2. By overestimating GDP: a reclassification of part of the foreign income of Global Business Companies (GBCs) from National to Domestic Income. This GBC adjustment by SM has risen from Rs33bn in 2018 to Rs 90 bn in 2023, representing 7% of GDP in 2018 and 13% in 2023.The estimates of the investment rate for 2023 and 2024 have also been overblown to 6.2 % and 6.6% respectively, compared to 4.1% in 2021 and 3.9% in 2022 and an average rate of just 4.4% over the period 2014-2022. (See my post on “GDP:Fake Data”) and
3. By understating Public Sector Debt(PSD) : Quasi fiscal expenditures (and grants) by BoM and MIC (recall the Rs 55 billion grants to the budget and the Rs 25 billion to AHL) and the transfers from some parastatal bodies to the budget which represent a PSD understatement of some 15 % points of 2023 GDP.
This is Pada’s strategy of public debt/GDP reduction- manipulating statistical data to present a more rosy picture of the public debt situation.
L’express seems to be giving him a lifeline….he is on his way out and he cannot leave the stage as a feckless Finance Minister-a one-time MoF. We can see that he is preparing his way out by trying to build bridges with the press and the private sector.
