In L’express : In and Out -Un ancien secrétaire financier, qui n'a pas été retenu comme conseiller au PMO ( ou comme future FS) serait devenu, du jour au lendemain, une voix critique dans les rangs de l’opposition. Depuis, il dénonce systématiquement le gouvernement pour sa politique économique.
Indeed, first we had a radio interview where he argued that Mauritius has the “marge de maneouvre” to avoid “un budget d’austérité”, since foreign reserves have reached a record level of USD 8.8 bn, while the trade deficit stands at only USD1.4 bn. In an article in L’express ,titled “Fiscal Discipline” Sushil Khushiram gave him a fitting reply .
First, his figures about the trade deficit for 2024 were wrong , it was actually far higher at USD4.4 bn .
Second, the gross external reserves were much lower, or close to USD5 bn, in net terms, excluding Bank of Mauritius (BoM) foreign short-term borrowings of USD1.7 bn, forex deposits and cash balances of commercial banks with BoM of USD1.6 bn, and gold swaps of USD0.3 bn.
Third, reserves adequacy can be better assessed in relation to the external current account(CA) deficit , including CA without the GBCs.
And Last , the IMF , which has a more rigorous measure of reserve adequacy, had urged the BoM to bolster our inadequate foreign reserves buffers to guard against external shocks.
Convoluted arguments, analytically flawed ,decimated by Sushil !
Not deterred , he fights his way back via an an interview with Defimedia .This time he drops the claim that our forex reserves are abundant and provide room for fiscal policy manoeuvre. But he maintains that fiscal austerity is wrong – ‘L’austerite est unutile”.
But he contradicts himself by rightly arguing that « A tout prix, nous devons rompre avec les politiques du passe qui consistent a injecter ces fonds dans la consommation pour stimuler la demande ».
Social benefits, i.e., pensions and social aid, account for a third of budgetary central Govt expenditure including special funds. Social benefits together with employee compensation represent half of total expenditure. Whereas capital spending amount to less than 10% of total expenditure, or about the same as interest payments on debt.
To bring down the current account deficit and debt to sustainable levels, Govt social spending, not capital spending, can and must be cut, thereby reducing consumption import demand, and the fiscal deficit. This is called austerity. And it is not useless.
To which Sameer Sharma had commented quite elegantly that “ ….Ali keeps on arguing that debt does not matter but it does when our credit rating is near junk. Mauritius has no choice but to engage in fiscal consolidation which yes I agree will hurt growth.
We are in a classic debt trap with most in Mauritius thinking money grows on trees and thinking that just because you vote for a govt, they will figure it all out... its a complex problem and the previous lot messed up and there is no painless solution. In conclusion yes we should be using money to invest in productive Investments that enhance our ability to produce more goods and services but we also need to pay down the debt. We cant certainly give money to people to spend more on imported goods which is what most seem to want.”
But our ex-FS , persists et signe. The conclusion of the Chagos deal was too good an opportunity to miss. In the Week-end newspaper he comes back again with an article titled “Le Gouvernement dispose-t-il d’une marge pour le Budget 2025/26?”
He argues “Oui, c’est le cas. Mais la vraie question est : comment cette marge sera-t-elle utilisée ?”
Despite his reference to many sources, including the ‘Statement of Government Operations 2024/25,’ he has again got his figures wrong from revenue, expenditure and the borrowing requirement figures . Quite a confusing article and he is all mixed up and finally acknowledging that “Une fois les réserves épuisées, l’austérité deviendra inévitable”.
Productivity based growth , he argues for....., we have been struggling regime after regime to boost productivity, including under Mansoor/Sithanen tandem …Their top proposal then was to send our workers to work in cold storages in Canada (sic)
But he agrees that “Sans réforme, la dette grimperait à 105 % du PIB à la même échéance.” More so, without reforms , we stand the risk of being downgraded, of capital flight, of economic meltdown.
And he keeps up repeating what most Mauritians are well aware of that “Maurice devrait utiliser sa marge pour investir dans l’avenir : éducation, innovation, infrastructures..
How do we create this “marge”, the fiscal space to generate more capital investment ….through a solid framework of “fiscal consolidation.” That's it !
