Titbits:Propositions indécentes; Learning to unlearn; Excess liquidity and reform of the sector and Receding inflation risks

Propositions indécentes

The document ‘Prospects for Agricultural Markets and Income in the EU 2013-2023’ apprises us of the European Union proposal to wind up the sugar quota scheme by 2017 which will lead to a reduction in the EU domestic sugar price and EU sugar imports and that in the long term EU will be moving closer to full self-sufficiency and to being an occasional net exporter. EU sugar beet production is projected to expand in the coming decade and additional volumes will be used mainly to produce sugar rather than ethanol. The expiry of the sugar quota system in 2017 is part of the 2020 Common Agricultural Policy,(CAP).

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