Better live with the devil you know…
The sinuous path of proposed ‘electoral reform’ in Mauritius over the past year since the Med Point scandal is now well known. It is in this context that, having trounced the MSM out of government on the strength of this episode, the MMM initiated talks with Labour. On the surface of it, it looked as if all that the MMM was targeting out of these talks was a dose of proportional representation. This is where Prof Carcassonne and Rama Sithanen were successively called in to give inputs on the subject. However, it came to light eventually that a political alliance between the MMM and Labour was also being negotiated. Obviously, the numerical strength of the MMM in the Assembly was indispensable to carry out any electoral reform since a three-quarters majority would be required to amend the Constitution to give effect to whatever reform was to be proposed. By then, a new phrase was introduced in political dialogue: ‘second republic’. This was going to be the platform of an alliance between the two parties whereby power would come to be shared along a new scheme between the future President of the Republic and the Prime Minister, with more power devolving onto the President than at present.The people appeared to have no say in the matter. It was the concern solely of the leaders of the two political parties. No one appeared to have given enough thought to the inherent instability of the proposed system in which the party which would manage to secure a majority in the House would make void whatever stronger powers had been vested into the President. Not enough consideration had been given to the longer term.There was no ruling given at that time by the United Nations Human Rights Committee (UNHRC) in the matter of the petition brought before it by Resistans ek Alternativ, a political party challenging the electoral rule, derived from the existing Constitutional set-up, that one has to decline one’s religious/racial identity to be eligible to stand as candidate for general elections. The UNHRC’s recent call to the government to inform it, inter alia, within the next 180 days, about the government’s stand on whether the community-based electoral system is still necessary, has been added on to the so-called urgency of the ‘electoral reform’ issue. The government could very well respond to this call by stating that it would be futile on its part to canvass any change from the existing electoral model if it (the government) does not command the required majority to amend the non-complying parts of the given Constitution and electoral rules based thereon. This call is not reason enough for the government to rush into unstable arrangements with the opposition.We have drawn attention on quite a few occasions that a bad deal with the opposition, implanting a serious factor of instability in the electoral system, is to be shunned. This error will be costly to future generations and, almost quite certainly, irreversible. Better live with the devil you know than one you don’t, as they say.The Tussle between Finance and BOMOne would have expected that the Ministry of Finance would have adopted a more elegant attitude by not coming out in public to wash its dirty linen. That would be asking too much from our decision-makers, it appears.The Ministry decided to parade its quest for a stronger devaluation of the rupee than what it has obtained already, by having recourse to what may be qualified as a colourable device. It decided late last week to invite bids from commercial banks for them to sell to it up $100 million. Not that the Ministry is immediately in need of so many dollars to pay up its ordinary bills, such as external debt. It has not even stated having such a requirement for reason that its principal banker, which is the Bank of Mauritius (BoM), would not have met its foreign exchange requirement, if any. It has been going out on this foray because it would have been informed by the IMF that a rupee depreciation could have eked in a notch of additional growth in the country’s GDP.Really? Have we missed out a bout of ‘competitive devaluation’ to get a slice of an ever-shrinking external market? Since no one has come out to establish that he, as an exporter of goods and services, has lost market due to the rupee being strong, all one can conclude is that this supposed additional notch in GDP would have been an artificial and non-enduring one. Windfall gains obtained by this method are not quite the same as permanent gains obtained by raising the productivity of capital and labour in the workplace. Worse, looking at it from the other side, this rupee devaluation would have immediately impacted by way of higher import prices and a consequent further consumer purchasing power meltdown. The rupee has already slipped in the past few days by a couple of percentage points thanks to the Ministry’s verbal intervention.As the BoM has not delivered the magnitude of devaluation of the rupee that the Ministry/IMF would have hoped for, the Ministry’s incursion to buy up the hundred million dollars on the local foreign exchange market is intended to bring down the rupee further. By acting in the manner in which it has, the Ministry has sapped the central bank’s authority on the market. It has enlisted the support of commercial banks to publicly trounce the country’s central bank.What respect will those banks have for their regulator and the one whose lawful duty it is to make the financial market function smoothly in the public interest? Not much. Whenever those banks want to undertake a devaluation of the rupee henceforth, to salvage themselves and their possibly over-indebted customers in distress, all they will need to do is to override the normal market process by artificially drying up available foreign exchange on the market. Some of them are well tried in this art and the central bank has successfully stopped them recently from indulging in this sort of thing to the detriment of the public. Be that as it may, the current situation created by the Ministry means that banks will have been given full latitude to thrash the rupee’s exchange rate to their hearts’ content. Wall Street will have gained the upper hand.This is the signal the Ministry has just given by its rash decision to buy up a large amount of dollars from the market all at once in order to create the necessary dearth of foreign exchange and get to a manipulated devaluation of the rupee. The question is whether the private sector will escalate the tussle between the two and how far the process of undermining will eventually go to.
* Published in print edition on 27 October 2012