Budget 2022-23: ‘Tricks’ and ‘Stratagems’

Editorial

In the wake of the Russia-Ukraine war that began on 24 February, energy and commodity prices have surged, adding to inflationary pressures from supply chain disruptions and the rebound from the Covid‑19 pandemic. Price shocks are having an impact worldwide, especially on poor households. Should the conflict drag on, the economic damage will be all the more devastating. Mauritius is already feeling the consequences of the war. The fall in the purchasing power of consumers, growing unemployment and increased poverty have the potential to create social unrest, as indeed they did with street protests in a few localities a few weeks back. It was therefore expected that the third budget of Hon Padayachy would come up with immediate and concrete solutions to bring relief to a large swathe of the population.

That objective seems to have been achieved, judging by the positive response across the board to the measures proposed in Budget 2022-23, namely the Rs 1000 monthly increase in salary to be granted to all employees and self-employed earning less than Rs 50,000 per month; rise in old-age pensions of Rs 1000 and Rs 2000 per month for those between 60 and 65 years and those above 65 years respectively; subsidy of over Rs 4 bn annually to keep the prices of some commodity goods unchanged and to restore some of the lost purchasing power; removal of municipal tax for town dwellers, lowering of income tax and rise in personal allowances for the middle income and increase in social aid for the vulnerable groups, etc. Even if he qualifies the measures proposed as coming ‘too late for many and not enough for others’, former Finance minister Rama Sithanen concedes however, in this week’s interview to this paper, that ‘everyone, everywhere in the country is expected to benefit somehow from these several measures…’ This is all very well, and no Finance minister could have shirked responsibility in the current socio-economic climate by not addressing the pressing existential concerns of the less well-off and the middle class.

The devil however is in the details, and it is in probing into the financing of these measures that will run into billions of rupees that Rama Sithanen lifts the lid on how Hon Padayachy would have had recourse to ‘tricks and some stratagems’ to build a ‘massive war chest’ through the instrument of the ‘Special and Other Extra Budgetary Funds’ (SOEBF). It is in the SOEBF that are parked underutilized funds, which has the effect of ‘artificially raising the budget deficit of the Consolidated Fund for the year while it increases the availability of funds in the Special Funds for subsequent years. When the deficit of the Consolidated Fund is high, he does the reverse transaction.’ Sithanen adds that ‘the budget deficit has become meaningless as he (Hon Padayachy) uses the money in these special funds to decide on the exact size of the budget deficit he wants to present’.

The availability of those huge funds, estimated to be around Rs55.3 bn, indicate that the government has indeed room for manoeuvre for astute balancing of economic and political objectives, as well as for the use that can be made thereof for the financing of different projects that would help meet its electoral objectives – should it go for snap elections well before the end of its mandate or even nearer to the end of its mandate.

While these short term and medium term budgetary measures will to some extent lighten the burden on households and by extension pre-empt further social unrest, a long term concern of all citizens is the level of debt that the country has accumulated and the emptying of the Bank of Mauritius reserves, and how this will impact future generations. For some time, post-budget there may be a relative lull on these issues, but they will surely come to the fore again in due course, and the people will want cogent, convincing answers. They haven’t come so far, and the sooner they are provided the less untrusting of government the people will be. This is also a matter that needs to be addressed.

Mauritius Times ePaper Friday 10 June 2022