Amortizing the Social Impact of Covid

Some estimates have it that it may have cost public finances Rs 25 billion or more… barely more than the uncertainly useful Safe City CCTV cameras plus a barely utilized National Sports Complex at Cote d’Or

By Jan Arden

Credit must be given where it is due. In retrospect, we had an unexplainable “attentisme” when it concerned early pre-ordering of vaccines from a variety of known laboratories. The vaccination campaign took off late, when the gift of 200,000 doses from the government of India landed around February this year and gave impetus to the process, albeit initially in poorly planned conditions and the added onus of a controversial rights waiver form. But, following the cooperation and sacrifices of the population, there ensued several months of respite late 2020 which augured well for the re-opening of our frontiers sometime in early 2021.

“Covid-free” or safe we may have been, but there were also ominous signs that a second, if not a third wave of viral infection, with new strains, were on rampage elsewhere. We failed to guard our shores with enough vigilance and have been paying the price throughout the first half of this year with sporadic viral eruptions and red zones across the island, sending health and other frontliners in overdrive while economic operators were dismayed by costly delays in the re-opening of the economy. In parallel, patients undergoing renal dialysis and their families were thrown into anxiety with the as yet unexplained fatalities at Souillac Hospital.

Had this state of pandemonium over fifteen months, wreaking havoc on health, our small to large business sectors and the economy in general, been allowed to gnaw into the social fabric of the country, a social unrest of unknown proportions could have been much feared. Credit has therefore to be rendered to the wise decision by the authorities to establish the Government Wage Assistance Scheme and the Self-Employed Assistance scheme and maintained both reassuringly, with their teething and hiccups, for a majority of the population not in public service.

Some estimates have it that it may have cost public finances Rs 25 billion or more. In perspective, that’s barely more than the uncertainly useful Safe City CCTV cameras plus a barely utilized National Sports Complex at Cote d’Or. The Minister and the government may come under flak for a variety of reasons, including plunging their hands to the elbows in our national reserves at the BoM, but this double assistance scheme throughout the pandemic was a vital imperative. It prevented possibly massive layoffs in sectors badly hit by Covid-19 and kept a minimum financial inflow to meet basic needs of those thousands not in formal employment sectors.

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Tax and spend

Neither the Ministry of Finance and Economic Development nor government which, up to early 2020, had been so profligate in public spending for recurrent and capital expenses could have expected that a pandemic would throw the world askew and land Mauritius in tough times requiring many tough decisions. The Finance Minister had no time to bask in the afterglow of his election and appointment but, with Covid and its handling, the opportunity was undoubtedly thrust upon him to reckon in the popular perception among our ablest Finance Ministers. It is therefore somewhat surprising that, despite the welcome Assistance Schemes referred above, the alchemy with the population does not seem to have gelled as yet.

This may have little to do with his personal qualities and skills as illustrated in Parliament. We prefer to think he has not been helped by a series of choices and mishaps, for want of a better term, since taking office. For instance, even if the National Pension Fund mechanism needed review to ensure its longer-term sustainability, was there any urgency, in the midst of a harrowing pandemic, to scuttle the system entirely in favour of a tax-based juggernaut (the now infamous Contribution Sociale Généralisée), that looks likely, according to actuaries, to run out of control within a few years? Or the differential treatment meted out to civil servants and the productive sectors of the economy in this as in other measures? Was Mauritius turning into a “Tax and Spend” jurisdiction, asked the economic observers, the Opposition and more worryingly for this government, the private sector, even those dependent on government and BoM funds to ride out their major financial difficulties?

The last budget might have been the right time for curbing government profligacy, instill confidence in economic operators, project new hopes and ambitions for our youths, develop new pillars and consolidate existing ones, even if some “lame ducks” would have to be sacrificed. Unfortunately, it was wedlocked in the same Tax and Spend spirit, with Rs 65 billion announced for public infrastructure projects, providing a somewhat illusory feel-good for party henchmen, but as experience has demonstrated, way beyond the capacity of public sector to absorb, control and deliver more than some Rs 25 billion worth of capital projects. Many of those, as in previous exercises, may simply gather dust waiting to haunt some future budget. As for taxes, including the combined Rs 6.40 litre rise in fuel prices, the depreciation of the Rupee and the crunch on cost of living most Mauritians are intimately aware of their impact.

The reputational awe the Minister of Finance might have been granted was increasingly under erosion, not helped by budgetary forecasts that looked inexplicably rosy-eyed, namely a forecast economic growth rate of more than 9% when all reputable local and international observers place best estimates between 5 and 6%. Tourism at 650,000 arrivals in the coming 9-10 months after frontier re-opening, without any mention of the national carrier’s fate and role, sounds like wishful thinking. These divergences may be ignored but the unprecedented solemn and rather brutal take-down by the IMF a few days before the budget and the later heavy weather made of explaining loans, interest-free advances and outright grants, presented as Revenues rather than Debts, sent alarm bells ringing in many quarters. At such a portentous Ministry, can government afford continued controversies on multiple fronts, a palpable loss of trust by economic operators and a lack of empathy by the ordinary layman? The time has probably not come to ask: does it have any options?

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Exiting the Grey List

Days after talks with the former PM, Navin Ramgoolam, the post-plenary announcement by the FATF that Mauritius had largely complied with key legal and regulatory requirements of the IMF-influenced institution has boosted confidence in operators and the parent Ministry that the huge efforts made by all stakeholders may bear fruit at the next plenary scheduled for October this year. It is a long awaited piece of welcome news ever since our jurisdiction landed in hot water in February 2020, falling foul of norms and practices of countries that tackles money-laundering avenues that allow criminals to whitewash their ill-gotten gains through a variety of sources: drug trafficking, embezzlement, large-scale racketeering and rampant corruption. An exit of the infamous grey list with the dovetailed EU blacklist in tow would be indeed a much-needed balm on our national pride as much as a huge relief for our operators and banking sector.

However, the authorities and stakeholders will be fully aware that Grey List exit will only be considered upon a satisfactory report from the experienced auditors that are due here to test how far our laws and regulations are applied. They will also probably determine our capacity for conducting complex investigations into sophisticated financial scams and the demonstrable output in terms of high-profile cases completed, taken to court and convictions secured. Our exit in October now greatly depends on the demonstration of credible and independent investigations by the set of disparate investigative and regulatory agencies, including the likes of the FSC/FIU, the BoM, the GRA, the ICAC and possibly others. We hope they will be fully prepared for that face to face audit exercise.

* Published in print edition on 29 June 2021