Repo rate unchanged: Wise decision but......

The decision of the 32nd Monetary Policy Committee (MPC) to keep the Key Repo Rate (KRR) unchanged at 4.65 per cent per annum was a wise decision. Much of the wrangle between the Ministry of Finance and the Bank of Mauritius, for the moment at least, is misplaced. Instead of throwing stones at each other's glasshouses, they need to work together to mop up the excess liquidity in the banking system and strengthen the financial sector.

Titbits : Budget 2014 ; The Central Bank’s Macroprudential Measures; The Poverty Trap

Budget 2014 arouses at best mixed feelings. It attempts to give the impression that under a very difficult economic environment, the Minister of Finance has been able to walk a very tight rope to achieve fiscal consolidation and at the same time try to boost economic growth and improve living standards. It includes various measures which are positive and which we approve of. But the budget is also deceitful as it has concealed the negative aspects while highlighting the positive measures.

Titbits: MOFED: The merger Revisited ; The NAIRU Debate: Growth and Unemployment; Tackling the real estate bubble; The Budget: Prioritized expenditures

MOFED: The merger Revisited

Although the merger of the Ministry of Planning and Economic Development (MOFED) with the Ministry of Finance was announced in December 2003, efforts at an effective merger of the two cadres started in 2006. The whole idea about the merger emerged with the priorities set out in the 2000-01 New Economic Agenda.

The State of our Public Finances

If we want to comment on the state of our public finances, a cursory look at the budget balance as presented by the Ministry of Finance (MOF) is not enough. We need to go deeper.  First of all, we need to consolidate the figures;  the off budget funds-the Special Funds- will have to be integrated to the budget  to generate adjusted comprehensive fiscal aggregates.

Current Account Deficit: All is not well

(Published in Business Magazine No. 1009, 18-24 Sep 2013)
It has been quite some time that we have been chanting that "all is well", persisting with our business-as-usual attitude and ignoring the fact that the external current account deficit (CAD)  remains our biggest worry today – and  one of our most pressing macroeconomic challenges.  It is better that we start doing something about the CAD  before  the crisis comes knocking at the door.

Titbits: The inflation v/s Growth Debate ; The Right Policy Mix; Inflation Risks; Weak Monetary Transmission Mechanism; Effect of PRB awards on Inflation.

The Inflation v/s Growth Debate

As slipping growth accentuated recently, the Ministry of Finance (MOF) and the Bank of Mauritius (BOM) have found themselves increasingly at odds and the MOF looked to the Central Bank to reduce interest rates to provide a fillip to growth. The view that the MOF is for growth and that the Central Bank is obsessed with price stability is a simplification. Similarly, reference to policies of central banks across the planet and their “forward guidance” strategy to try to justify one’s pro-growth position is illogical and absurd

Titbits: The ESTP ; The Poverty Issue ; Cost-effective Social Transfers ? ; The Evil of Inflation and Inequality.

The Economic and Social Transformation Plan: a non-starter
(Published in MTimes and in L'express 01.09.2013)

We recently had the opportunity in the context of the seminar on the ‘Country Strategy Paper – Mauritius’, presented by the African Development Bank, to listen to the arguments of the Financial Secretary (FS) on the Economic and Social Transformation Plan (ESTP). It was in reply to the few well-chosen barbs of his earlier mentor, Mr R.Sithanen, with respect to the present state of policy paralysis, the absence of any meaningful reforms and the lack of development of opportunities for new sectors. The FS failed to convince us. After having held the country to ransom for seven years with its short-term incoherent and uncoordinated policies and undermining all attempts to set up an independent full-fledged planning unit, it is not the last-minute elbowing to pull out a summarily concocted 10-year plan -- the famous ESTP -- that will convince us that the Ministry of Finance (MOF) can carry out high level thinking, innovative policy making and planning.