Coronavirus’ Economic Fallout

Editorial

By M.K.

World health officials said Tuesday the mortality rate for COVID-19 is 3.4% globally, higher than previous estimates of about 2%. “Globally, about 3.4% of reported COVID-19 cases have died,” WHO Director-General Tedros Adhanom Ghebreyesus said during a press briefing in Geneva. In comparison, seasonal flu generally kills far fewer than 1% of those infected, he added.

The World Health Organization had stated last week that the mortality rate of COVID-19 can differ, ranging from 0.7% to up to 4%, depending on the quality of the healthcare system where it’s treated. Early in the outbreak, scientists had concluded the death rate was around 2.3%. During a press briefing Monday, WHO officials averred that they don’t know how COVID-19 behaves, saying it’s not like influenza. They added that while much is known about the seasonal flu, such as how it’s transmitted and what treatments work to suppress the disease, that same information is still unavailable when it comes to the coronavirus.

Given the element of uncertainty that Covid-19 has introduced and its broader repercussion on the global economy – since its outbreak in late December 2019 – ‘through weaker foreign affiliate sales, tourism spending and imports, as well as disruptions to global supply chains’, governments around the world are bracing for the effects of Covid-19.

‘A known unknown is how one major company boss described the economic fallout of coronavirus in a comment to the BBC. It goes on to add that ‘what the markets have woken up to – perhaps belatedly – is that the disruption to the economic activity from coronavirus is wider, deeper and perhaps longer lasting than previously assumed. As major outbreaks spring up outside China, it is clear that it is not just global supply chains but also demand from consumers that’s suffering, as efforts to contain the virus keep them away from shops, bars and restaurants. What is unknown is exactly how bad and how lasting the impact could be. But what is known is that this comes at an already tricky time for the global economy.’

A tricky time as well for the Mauritian economy, which may also suffer a hit, and especially so at this stage when the focus should be on revitalising the economy. This may be the reason that has prompted the Prime Minister to go public Wednesday on the measures his government will be taking to face up to the challenges that the Covid-19 represents for the country’s economy, namely the reduction by 10% of the operating expenditure of all ministries, cancellation of Garden Party and State Banquet organised in the context of Independence Day celebrations, etc. That’s besides the multisectoral committee, presided by the PM, to monitor the evolution of the Covid-19 pandemic and its impact on the Mauritian economy.

* * *

While the government is bracing for the effects of Covid-19, what appears to be the offboarding of the senior management of two major institutions of the country is rather unsettling, and has come as a surprise. Somas Appavou becomes the eleventh Chief Executive Officer since the setting up of the national airline to have been offboarded five months ahead of the termination of his work contract from the top post at Air Mauritius. On the other hand, the decision to get Yandraduth Googoolye, Governor of the Bank of Mauritius and Vikram Punchoo, Second Deputy Governor, to vacate their respective posts has also sent some shock waves. It is not known however whether these decisions about the top management at both Air Mauritius and at BOM have been taken in the context of a ‘remise en ordre’ of the two major public institutions which play a critical role in advancing the economic well-being of the country.

Although it is owned in the majority by the public sector, Air Mauritius is a listed entity on the Stock Exchange of Mauritius. Like most airline companies of the world, Air Mauritius has had a chequered history of ups and downs. It has gone through several storms in the course of the more than 50 years of existence. Political interferences and consequent weak managements are partly to blame. Open skies policy and the resulting competition have also challenged its viability. But it is the quality of service which has helped sustain the business, despite running for long number of years with an aged and old fleet of aircrafts. It has overcome poor mismanagement decisions taken in the past, such as when it landed into catastrophic hedging contracts for its fuel oil some years back. Hopefully, politicians and others will learn the lesson and they will let the company do the job which it has successfully done on behalf of the country in spite of all.

As for the Bank of Mauritius, its legislation gives it two specific duties: (i) to maintain confidence in the internal and external value of the rupee, and (ii) to make the domestic financial sector a sustaining pillar in the sound and stable growth and development of the economy. Although it hasn’t clearly been easy for the Bank to balance the equation between aggressive demands upon it of certain private sector lobbies and the latter’s henchmen at Government House at different times, on the one side, and the public interest, on the other, many of its decisions since it was set up have concretely helped to develop soundly the local financial market, and along with it a diversified economy in Mauritius.

The BOM’s role in the circumstances which led to the closure of ex-Bramer Bank and that ultimately brought down the BAI has been diversely commented in different quarters, and only an independent inquiry can reveal whether it acted prudentially in this particular matter. The latest controversy regarding the proposed utilization of the Special Reserve Fund for repaying government’s external debt, which is considered to be directly at odds with the existing provisions of the BOM Act, has not died down yet. It remains unknown at this stage whether the ‘forced departures’ of the former Governor and his First Deputy could be linked to the SRF controversy.

Whatever be, the fact remains that both Air Mauritius and BOM have played and will continue to play crucial roles in sustaining the Mauritian economy. While it is in order for any government to want to have trustworthy cadres to work with in critical sectors and high positions, it is equally its responsibility to ensure that those who are called upon to lead be chosen less for political reasons than for possessing the professional track records that their assigned roles demand. That is what ‘in the national interest’ is all about – the more so in view of the difficult times ahead.


* Published in print edition on 6 March 2020

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