Budget Normalcy

Editorial

On this 4^th June 2020, Hon Renganaden Padayachy, the country’s Minister of Finance and Economic Development, delivered in these difficult times of unknowns, his first annual budget. This was obviously eagerly awaited by observers, media, the political class, the business community and the population. Would it be framed with an inspiring vision, leading us beyond the gloom, fears, anxieties and narrow expectations of one and all? Would it articulate the paradigm shifts, recognise the necessity of shared sacrifices, the departures from business as usual, forging where necessary, new pathways or new horizons? Would the Minister skirt or address head-on the controversies around the oxygen balloon freely lifted from the BOM coffers to the tune of 78 bRs and the extra-budgetary 80 bRs of BOM foreign exchange reserves being made available to our larger profitable corporations, suffering transitional difficulties? Many questions were awaiting answers.

He articulated the stakes thus: “Sir, I am presenting the National Budget at a time of unprecedented crisis…Today, I will unveil before this House our strategy. The challenge is daunting, but, our response is nothing but historical…” So what are the first impressions regarding the budget?

For starters we can only commend its structure around three main thrusts. The first thrust concerns reboosting investment and the economy which has been in lockdown limbo and may face difficulties for several long months. It essentially covers a series of measures identified for the sub-sectors of the traditional economy.

Construction, deemed to be the engine of that recovery, receives a continued boost in the form of public works, with targeted construction of 12,000 social housing units (SHUs), a new dam at Riviere des Anguilles, half of the Rs 10 bn needed for completion of the Rose-Hill to Curepipe tramway stretch and some Rs 10 bn for new roads and bridges, revamped bus terminals accompanied by a sprinkling of facilitation measures concerning levies and fees. There is justified skepticism at the 12,000 social housing units target at Rs 12 bn over three years, out of which only 20% are destined to the most vulnerable segment (on less than Rs 10,000/mth). On their track record, our public housing companies (NHDC-MHC) can, at full regime, build and deliver 500 units a year at unit costs of 1.8 mRs. Unless government has some unrevealed trump cards up its sleeve, the financial and construction targets look far beyond any reasonable test.

Reboosting Agriculture announces a rather grandly titled National Agri-Food Development Programme, banking on another deja-vu proposal of a Land Bank of abandoned lands, estimated at 20,000 acres, to be centrally mediated now by Landscope. Although peppered with some concrete reliefs (guarantee all planters, including the large estates, 25,000 Rs/ton sugar for their first 60 tons sugar, significantly greater potato and onion seed subsidy) the section is short on concrete proposals.

The budget recognises Manufacturing as a pillar to build upon although it has been left in prolonged decline for quite a while and the sprinkling of desirable measures unfortunately do not seem to announce a grand new plan, nor the “shift in paradigm strategy” claimed further for exporting sectors.

Tourism is probably the hardest hit sector but again the proposed useful measures about reducing or waiving some fees and levies, relax current Hotel Invest schemes, another rebranding study and another commercial partnership with Liverpool Football Club, are perhaps not up to operator or employee expectations, but the larger and profitable ones will have the undoubted parallel benefits of massive public capital injections through the BOM subsidiary, the MIC, and will probably not be complaining loudly. No words in the budget to justify or explain the MIC funds.

The struggling Financial services sector gets mention through a proposed target of September 2020 for urgent compliance with FATF action plan shortcomings and proof of their effectiveness. No mention is made of the apex Financial Crimes Commission announced in last year’s budget and it is quite unclear how government will overcome our institutional inadequacies to conduct the complex legal and financial investigations that would provide meat to any proposed Financial Offenses Court.

Other sectors like Cultural affairs, Sports, Pharmaceuticals, the much-bandied Blue economy or more Business facilitation measures, get mention through a smattering of welcome incentives, although, apart from the proposed new technology-incubation park to be situated at Cote d’Or, they cannot be said to provide a historical departure to new horizons.

The second thrust of the Budget 20-21 concerns engaging the country in structural reforms, in particular, the replacement of the current National Pension Fund system. Everybody will remain entitled to Basic Retirement Pension at age 60 but contributors to the new (CSG) scheme above would get additional accrued benefits. Many questions about the new CSG scheme should receive fuller attention over the coming days. Another important series of measures are destined at encouraging expatriates, professionals and retirees, or their spouses to invest locally.

The third prong of those reforms are proposals to curb some of the excesses in overseas travel, perks and per-diems of Cabinet and possibly advisors, and renewal of official cars every 5 years instead of four. A welcome gesture, albeit not touching their life-time pensions nor the grand scale of perks and allowances for doing their job as expected of them, over and above handsome salary and benefit packages. But, curiously, total expenditure is projected to balloon by some 30 bRs to 162 bRs!

The third budget thrust is an earmarked amount of Rs 100 bn covering a variety of Quality of life or Eco-friendly measures, including Rs 2 bn for the National Environment Fund, out of which 1.2 bRs is earmarked for drainage infrastructure in risk areas, a variety of allocations for cleaning beaches, roadsides and public spaces, a commendable variety of measures to boost renewable energies or connect more sites to the wastewater grid and the usual series of measures regarding water distribution pipeworks and community services. Health facilities figure prominently with completion of the Cancer hospital at the former Medpoint clinic, and start of works on the Eye and Teaching hospitals. Education is cut down to 15 bRs and sees improved assistance for special need schools, but there are the usual tiring allocations to WIFI for schools and tablets for some new category of students, while the Education hub at Cote d’Or announced in last budget has disappeared.

On the fiscal front proposed measures include raising the solidarity levy on salaried Mauritians from 5% to 25%, introducing a corporate tax of 0.3% for turn-overs above Rs 500 m (excluding the tourism sector) and raising taxpayer thresholds. Many other measures abound including some assistance for SMEs through cheap loans at the Development Bank. Social measures include a Rs 5,100 six-month allowance with restricted coverage, a one-off allowance of Rs 15,000 to front-liners which forgets many categories (supermarket employees, fire services, waste collectors), a bottled gas reduction of Rs 30 when international rates have tumbled into freefall for months.

More detailed analysis of Hon Padayachy’s first budget will no doubt be forthcoming over the coming days from all quarters. There are, perhaps understandably, no explicit macro-economic targets. Without the Rs 78 bn BOM funds gifted freely to government real budget deficits sadly have ballooned to some Rs 60 bn which raises worrying prospects for next budgets without such a boon. This is perhaps the sole basis for the rather singular claim for a budget of historical dimensions.

* Published in print edition on 5 June 2020