A budget is important if it reflects the vision statement of the government and indicates a clear direction to achieve the goals set out in its development plan, as well as presents strategic thinking and concrete decisions to help the country face many of the short- to long-term economic challenges. These include measures to help the economy fight its way out of the difficult international environment, compounded by the uncertainty ushered in by the Covid-19 pandemic. How will Budget 2021-22, to be presented by Finance minister Renganaden Padayachy today, meet these objectives? What are the measures that will be proposed to reignite the engines of growth? Will the excessive budget deficits be brought under control? How will the budget fare in terms of reform delivery – pension and sectoral reforms to generate productivity improvements…? It is along these lines that Budget 2021-2022 will be analyzed.
Following its 2021 Article IV Mission to Mauritius, the IMF highlighted in a statement the challenges facing the Mauritian economy and what needs to be done to restart the engine of growth. ‘In the short-term,’ it stated, ‘accommodative fiscal and monetary stances are appropriate. As the country emerges from the pandemic, fiscal consolidation will be necessary to stabilize public debt, and monetary policy measures will need to be strengthened. During the recovery phase, Mauritius should prioritize support measures to improve the economy’s resilience and competitiveness and accelerate its long-term structural transformation.’
We have so far avoided making hard choices. The reform agenda remains unfinished and critical constraints to economic development have become increasingly evident. It is to be hoped that the budget will reflect a responsible approach to ensure a better future for the country, not one that comes down to a mere listing of projects, but without any strategic thinking and concrete measures to tackle many of the economic challenges facing the country.
In the absence of structures that would have made the economy resilient on its own if it had developed a broader base of production in past years, it is not unusual for governments to inject expenditures in public infrastructure – and in white elephants – to keep up economic activity. The idea rather should be in investments directed to sectors where they will be more productive and sustainable without state support if not in the immediate, at least in the medium term.
On the other hand, if existing domestic sectors of activity dependent on external markets will take time to recover their past rates of growth, it is to be hoped that the budget will help bring up new sectors of activity which can sustain themselves better than the rest. It means that we have to enlarge the economic base. This would be a more fitting response of the budget to our economic problem than doping, for example, underperforming exporters with “stimulus packages” as it would be envisaged with the MIC.
We could also just as well use the budget as the door-opener to a new class of empowered entrepreneurs, even if the scale at which they will operate at first will not be that big. The seeds of future production potential lie in decisions such as these. A lot of micro-analysis is involved in giving the economy the necessary impulse for turning it around to innovative activities and getting over hurdles which have manifested themselves already.
On the other hand, one expects in the budget measures of support to the ever-suffering middle class, which is contracting and this augurs badly in any country that it happens. There is an urgency to support and empower small businesses such as restaurants, the self-employed, the small planters – all of whom have suffered tremendous setbacks for lack of economic activity during the protracted lockdowns that have curtailed them. Whereas larger businesses such as supermarkets and banks have done much better. In fact there is a need for the budget to cast a more equitable eye over all sectors of economic activity and give the requisite support or incentives that will re-start the engine of economic activity – and lead to their growth. Nothing less than that is likely to lift he country out of the trough it now is in.
* Published in print edition on 11 June 2021
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