Budget Controversies

Agora

The PM advisors should turn their full attention to the socio-economic and political consequences of the package of discriminatory measures that unnecessarily clog the budget

By S. Callikan

Days prior to the Budget Speech, we observed that the new hand at Finance, Hon Padayachy, would have exceptional elbow room of Rs158 bn plucked from Central Bank reserves. We also noted that some Rs80 bn of this undoubted free manna was destined exclusively for off-budget large conglomerate support, for which parliamentary oversight and exceptional transparency was more than desirable.

That imperative aside, it still left a comfortable amount of free money (some Rs78 bn) for budgetary injection into reviving other sectors like the SMEs, meeting acute social distress caused by the pandemic, maintaining employment, reverse the decline in the country’s productive capacities and expanding the space for new opportunities, while tackling the relatively reckless electoral campaign pledges.

Despite this exceptional leeway, have those objectives been met in the 2020-2021 Budget? The jury is obviously still out but controversies have erupted around three major structural policy changes: pension reform, a discriminatory foreigner fiscal treatment and the shift away from a low-tax ecosystem. Few trade unions, economic operatives and their associations, even Business Mauritius, have been impressed. Construction is heavily foreign labour and foreign imports dependent. Despite a string of welcome individual measures elsewhere, no distressed traditional sector seems to have benefited from a structured plan.

On the pension front, not all of us were aware of the intricacies of the National Pension Fund (NPF/NSF, jointly Rs160 bn) and the returns on its management. I for one learned incidentally that only private sector employees and employers contribute to universally distributed basic pension and what the Minister was proposing was to increase these selective taxes further, with benefits frozen for 3-4 years and little visibility about future pension payments. I would have thought the whole question deserved better defence and pedagogy by the Minister and his advisors.

Meantime, new anxieties have cropped up post-budget: continued human stresses at our national airline, poor job prospects elsewhere, weak Central Bank reserves, currency depreciation, higher retail prices and scarcity of foreign exchange. It was government’s call to believe the pandemic’s enormous psychological stresses and fractures were opportune moments for those seismic policy shifts when ample reserves, siphoned out of Central Bank, were available to the Finance minister. He is undeniably tying the PM to the success or not of his own experiments in social and economic engineering.

* * *

Expatriates galore

Even if there were valid reasons to relax some of the regulatory annoyances governing expatriates, the unlimited possibility proposed for their spouses and parents to settle and invest in any small business or property has disturbing connotations. Will many corner shops, beauty parlours, delis, snacks and other outfits up North, in the expatriate enclaves of Black River or country-wide be owned and operated by expatriate spouses or elderly parents?

How many of the incomers will be birds of prey, soaking up middle management jobs in various sectors and adding little real value to our development prospects? Will they add fuel and take property prices out of reach of struggling, tax-burdened, qualified Mauritians? Will the latter’s legitimate housing or property expectations be served by the future middle-income NHDC flats? Are we planning to test the limits of our traditional hospitality?

We recall that SAJ had stamped down EDB’s previous plans belittling our passport or the sense of citizenship of honest, hard-working and qualified Mauritians. The current PM and his team may have had their attention focused on handling the pandemic through a praiseworthy dedicated public health service. It can generally be considered a success, although distressed, stranded Mauritians and their families forced to pay back loans, repatriation and quarantine costs, may certainly not concur. But the PM advisors should turn their full attention to the socio-economic and political consequences of the package of discriminatory measures that unnecessarily clog the budget.

* * *

Black holes

The Minister of Financial Services has to be commended for coming up with a more sober and factual presentation of the events posterior to the mutual evaluation report of 2017, published in 2018, which eventually lead to the IMF/FATF grey-listing in January 2020. Wordy reassurances, “high-level commitments” (which every suspect country brandishes) and any actions taken since, either on technical compliance or on implementation fronts, had obviously not been enough to stave off the heavy slap to our jurisdiction.

The European Union followed suit and sadly, through delegated powers that remain to be confirmed in October by the EU Council of Ministers, announced its intention to place Mauritius on the list of countries with strategic anti-money laundering deficiencies (the notorious “blacklist). Desperate efforts of our international diplomacy ensued, as detailed by the Minister, within the one-month appeal or protest period, but to no avail.

We still have no legally structured and competent investigative authority capable of the often complex financial transactions in the underworld of black monies, their whitewashing mechanisms through known means or diversion into drugs and terrorist financing. International agencies do happen to read our press and the long string of scandals buried under our eyes. CCID, ICAC or the FSC would elicit wry smiles as credible independent money-laundering investigating agencies.

Even the promised Financial Crimes Commission mentioned in the 2015 Government Manifesto, re-promised in Pravind Jugnauth’s 2019 budget, has been shelved aside in this budget. We can hardly claim to have either diligent risk management strategy or a credible sanction policy with demonstrable results. The string of dubious or corrupt overlords from elsewhere have at times benefited from highest-level assistance in settling their ill-gotten mountainous gains on our shores.

It was the worst possible time for the CEB corruption scandal of momentous proportions, where the African Development Bank and other international watchdogs will be scrutinizing the exemplarity and credibility of our response, in a situation where the Danish bid-winner has already investigated and fired its own personnel, accepting a 21-month ban from internationally funded bids. More than the outraged population, more than the furious Opposition, they will not buy cover stories.

While we certainly hope all knowledgeable hands will try their utmost to assist avoiding the October sanctions deadline, the PM must be fully aware of the necessity to tackle whatever bull is careening in the china shop. A heavy cloud of suspicion now extends over all major contracts awarded by the three big agencies (CEB, CWA & WWMA) falling under the direct purview of Public Utilities. Neither BAD nor other international funding banks, neither the IMF/FATF nor the EU will be amused by political expediency and business as usual. These are indeed exceptional moments.


* Published in print edition on 16 June 2020

Add a Comment

Your email address will not be published.