Published in l'express June 2025
It’s not a Budget for this fiscal year, for the short term; it’s rather a vision statement, without implementation plans, but with the promise of possible attainable goals not before 2035 at the earliest. It lacks the foundation to build a bridge to the future and contains too many gaps to ensure a safe and solid path to a better future.
Let’s see why!
AI is at the heart of the country's transformation, with a series of structural initiatives, although most are still at the promise stage. AI for ministries, start-ups, micro-businesses and small and medium-sized enterprises (SMEs), education, climate change, green economy, tourism and agricultural sector, food security and research institutes ….It's now that we are beginning to grasp the importance of AI, albeit a little belatedly. We have fallen behind in digitisation and AI compared to even African countries, and it will take us around 10 years to catch up.
Like the blueprints for our financial sector, year after year, we have been presented with new blueprints which have turned out to be damp squids. We keep repeating and spreading our all-knowing incendiary rhetoric till one and all start believing it as an irrefutable theme of our distorted reality. Meanwhile, the reality is that Gift City is succeeding in pulling the rug from under our feet. Anne ma chère Anne, ne vois-tu rien venir on “Fintech, Blockchain, Crypto-assets, the new holy grail, the panacea for our financial sector. Ni AI !
2. Crucial reforms :
It fails to address in the short term the main causes of the significant budgetary slippage, the increased public debt, the bulging current account deficit and the sub-par economic growth. From the very start the Govt was not serious about the much needed structural reforms ; they did not set the tempo and maintain a sense of urgency ; for them it was business as usual ! If they were intent on a genuine programme of bold reforms, they should have taken action as early as January 2025 with a number of key actions to support Govt’s commitment to undertake the structural reforms. A series of commissions should have been set up to work on pension reform, tax reform, subsidies, wastage , productivity, the reintroduction of the PBB…and conducting a forensic audit and phasing out of the MIC
These commissions would have provided some preliminary essential inputs for Budget 2025-26 . It would have been a more convincing budget that lays down the foundation - the first year of the reform process- and truly rebuild the bridge to a better future. And it would have answered the many doubters -those who are claiming “ de manque de concrets, des mésures bien définies…..on ne parle que de l’élaboration des blueprints ..”
Many of the crucial reforms have been kicked down the road , submitted to commissions of experts and to blueprints, For a Govt that is taking more than 6 months to nominate the CEOs and board members for our key institutions- paralysed due to a lack of leadership- it will take them, given NCR’s legendary indecisiveness and the slow and cumbersome bureaucracy led by his coterie of out-of- touch oldies , quite some years years to rebuild the bridge to the future. They will take their own time before we start having a glimpse of some finalised blueprints and proposed reforms ready for implementation.
3. No rupture just some tinkering:
Definitely, Budget 2025-26 will not be ushering in a new development model . The flat tax system introduced by the Mansoor-Sithanen tandem still reigns supreme, with some tinkering -a temporary deviance towards more of progressive taxation while the high level of recurrent expenditure remains unsustainable at 32 % of GDP . This has been the case for the past 20 years - the absence of substantial reforms in an archaic rent-seeking and tax-centric economy.
The constant failure at fiscal consolidation over the years has resulted in dismal capital spending to GDP ratios (less then 3% of GDP) and years of puttering growth . It’s thus understandable why we did not have the fiscal space , the resources to raise investment in education, in the energy and water sector, in IT and AI , and develop new pillars of growth….Now, we are merely tinkering with an economic system that doesn’t and has not delivered for large parts of the population. It is a failed economic system.
We are not redrawing the policies that favour the privileged, the oligarchy-dominated private sector of conglomerates and the rent seekers. We are not rethinking about our land markets, the high concentration of land, or the liberalisation of land that has unlocked massive potential for profits in real estate development for large landowners. We are not questioning the advantageous cast-iron contracts granted to Independent Power Producers (IPP), the Smart Cities projects, the real estate schemes, or the unproductive FDI inflows that go to construction and real estate activities. Many of our key markets remain oligopolistic, where our so-called performing firms have been extracting rents for years on the basis of their market power. Our fundamental choices have remained the same , so the talk about fundamental changes brought about by this budget is pure rhetoric.
4. The burden of the adjustment:
No, Budget 2025-26 is not one of fiscal responsibility with empathy and compassion, Neither is it a balanced trajectory of shared sacrifices to rebuild the bridge to the future. It is an unfair distribution of the burden of the adjustment effort. Again it is the majority of Mauritians, already the most disadvantaged, who still have to tighten their belts.
For the past ten years , the big corporates and top exporting firms have been having a feast-enormous profits from the deliberate depreciation of the rupee and price-gouging , Rs 20 billion as wage assistance scheme , export promotion subsidies, and some Rs 50 billion(printed money) from the MIC which bailed out the corporates to their advantage at our cost and the billions reaped from real estate schemes and speculation on FX. The previous Govt did not impose a windfall gains tax on the big corporates and the top exporting companies which could have made a more permanent difference to our cost of living -lower petroleum prices, the maintenance of subsidies on essential household items…
So now when it is the time for them to bear the burden of the fiscal adjustment , what to we see ? While the special temporary levy on banks will bring in only Rs 1.4 bn, we will have to bear a large part of the additional Rs 5 billion of VAT receipts . Like the earlier regime , this govt is also using inflation- forecast to increase to 4%-to inflate budget revenues without having to resort to further explicit taxes on the rich. We are the ones who will be paying the inflation tax , effectively losing our purchasing power while filling up the Govt coffers. That’s their so-called empathy and compassion !
5. À la sauce Padayachy :
Going over the figures, we can say that the Budget reflects a bit of the traditional Manraj format, a bit of Padayachy’s , especially on the overestimation of the revenue and underestimation of expenditure figures. On prend les memes on recommence , you will end up with more of the same kind of resort to trickeries that we had experienced in the recent past.
The budget deficit for FY 2024-25 is likely to be lower than 9.8% of GDP (exclusive of special funds) and the tax yield in FY 2025-26 is likely to be lower than forecast and expenditure that is frozen in nominal value will thus be increasing with inflation, which will result in a budget deficit/GDP ratio that remains uncomfortably higher than 5% and a debt slightly reduced by over 1% of GDP. Moody’s may not be happy! Not enough of expenditure reforms! Thus inspite all the bravado and applause about fiscal consolidation, we can now see that it is all hot air- typical of the NCR-Damry combination. They do not have the mettle to carry out the necessary structural and pro-growth reforms.
6. Conclusion
Budget 2025-26 leans heavily on the recommendations of some recent IMF and World Bank reports which are expected to help Mts come back stronger from the eye of a perfect storm. These reports have recommended a combination of bold short term and long term reforms. In Budget 2025-26 they have preferred to focus on the promises that may show us the way to heaven than on the bold short term reforms that would have ensured us that we are definitely avoiding hell. They did not have the guts go in for the demanding reforms. They just chickened out and the chickens will soon be coming home to roost.
