The tramway project: Untimely

There has been an alphabet soup of experts lining up to convince us that their alternative to the status quo is the ideal option-the tramway project. They have convinced us that the old solution of simply building more roads is unsustainable. They have provided a strong economic rationale for the tramway project. 

The NIT – a premature decision

(Published in L"Express )
Based on the recommendations of the Appendix VI on Earned Income Tax Credit (EICT) in the IMF Art IV document of May 2014, Government has proposed the Negative Income Tax (NIT) in Budget 2017/2018.  The IMF article argues that a EITC/NIT will generally augment the income of the poor and encourage labour force participation and employment. It makes the case for introducing an EITC for Mauritius because of its increasing income inequality, its relatively inefficient social safety net system, its low labour participation rate and high unemployment among the young and women.

The IMF and the Inflation narrative

In its Art IV Consultations 2017 Press Release, the IMF considers that inflationary pressures need to be tackled - “Inflation has picked up …., but there are signs of building of inflationary pressures.”. Some of our local analysts disagree. Let us try to grasp some of the portents of our inflation narrative.

IMF Art IV Consultations 2017 Press Release: A wake-up call

(Published in L'Express)

The IMF is appreciative of the projected level of real GDP growth of 3.9% in 2017, and of the continued robust economy, but considers that “vulnerabilities are rising”, namely with regard to a) the rising public debt and high budget deficit, b) rising inflation and low interest rates, and c) the rising current account deficit, and the overvaluation of the rupee exchange rate.

The Economic Development Board –Some Issues

(Published in L'Express)
The Economic Development Board (EDB) is essentially designed to improve investment promotion and facilitation by merging the Board of Investment (BOI), Enterprise Mauritius (EM), and Financial Services Promotion Agency (FSPA). It is a beefed-up BOI, to strengthen the existing powers of the BOI, which would also take over the role and functions of EM and FSPA.

Competitivity ?

The Nominal Effective Exchange Rate (NEER) has appreciated by 4.4 % between 2006 and 2014 and has depreciated slightly in 2015. Can we thus claim that this suggests an expansionary monetary policy.  No, the claim is not automatic. For instance, the depreciation may be offset by an increase in domestic prices relative to foreign prices or it may reflect a deterioration in the terms of trade ( i.e not in response to monetary policy decision, but due to some change in world conditions).

Excess Liquidity

Comments on an Article that claims that it is only now that the Bank of Mauritius is concerned about low interest rate, unproductive investment and savings.

I cannot understand the fuss about the interest rate ; the connect between the Key Repo Rate (KRR) and the interbank rates and other money market rates was inexistent. it did not make any difference to existing liquidity conditions if the KRR was raised or reduced because of the persistent prevalence of excess liquidity in the money market.