Today’s budget will be determining for the present government.
If it manages to revive hopes for the better as far as the socio-economic considerations are concerned, it will revive hopes that were placed in it in December 2014. By the same token, it will relegate to the background hopes the opposition parties may have been entertaining to come back to government any time soon.
The job in front of the new Minister of Finance is to cast aside the feeling of apathy which has been dominant as far as the management of the economy is concerned since the last 19 months. His task is already rendered difficult by the wave of uncertainty which clouds the future economic well-being of our traditional trading partners. The effort to make will have to be stronger.
Poor internal policies and a generally weak external economic outlook have combined to hold down the economy’s performance. A perception that public institutions have also been weakened as part of the political power game has not helped create the needed confidence in the political establishment. Whether for this reason or together with the gloomy external outlook, the economy has failed to show the robustness that was expected of it.
The challenge for the new Minister of Finance is to convincingly overcome resistances that would have cropped up in the way of our economic revival. It is not only that there has been insufficient demonstration from the public sector that it means business in terms of implementing policies that would have triggered the breaking of new ground. The record has also been poor on the part of the private sector, be it in terms of undertaking additional path breaking productive investment or creating jobs in sufficient numbers to absorb the unemployed. The government alone can’t pick up the blame if the economic outlook is not as strong as it should have been.
The language used by ministers has betrayed this lack of realisation in concrete terms on the part of the government. When economic progress is actually being made and it is visible to all, ministers speak in flowery language about all that is being done and the new potential so created. When such is not the case, they speak defensively to justify questionable decisions taken without much bearing in terms of creating additional GDP. It is this latter attitude that has prevailed the most. Pravind Jugnauth’s job is to change the tone to a more positive and constructive one.
So, what do people expect broadly from the budget to be presented today? First, it will be necessary for it to set a new tone to discard all the negativities that have affected business confidence since March 2015. However, that should not look like giving away to the big private sector unnecessary excessive advantages which will not show up, on its part – as it has been the case so far – in terms of concrete realisations other than rent-seeking.
There is no point to offer the private sector all sorts of tax concessions which they will simply pocket up with no counterpart economic development to show for the benefit of the population at large. If that is actually the case again, it will simply outrage a population being marginalised by growing inequalities. In fact, if the government officials in charge of preparing the budget would have done their homework properly, they would have tied up the availability of “incentives” to the private sector on the basis of its actual performance in terms of realisations of projects, not on hypothetical ones.
The want of economic performance by the private sector in past years, as seen in the insufficient progression of investments, narrows down the country’s economic scope, on the one hand. The private sector appears to have become extremely risk averse and this is seen in its unwillingness to embark on new lines of business directed to export towards outside markets. It can afford to wait and see and jump on the bandwagon only when the public sector has created the scope for it. On the other hand, those who pay the price for this lack of private sector initiative are the worse off members of society on whom the ever-increasing indirect tax burden has kept falling, besides thinning down their job prospects. The Minister would need to bear this factor in mind.
The media has a tendency to paint the government black if economic projects do not materialise enough to make for a higher rate of economic growth. It scarcely points the finger at the private sector. If that has to be so, one needs to know which are the valid projects that were sent for public sector approval and that are actually stalled for reason of administrative tracasseries. In the present international economic environment, it would be unthinkable for public officials to hold back valid projects for no sound reason. The Minister will be expected to clarify the rules for efficient approval of projects.
If there is one serious shortcoming in public policies, it is the absence of a clear link between granting of permanent residence permits to non-residents and not requiring permit holders to implement in a given timeframe additional projects with a view to expanding the country’s economic scope. We are welcoming enough of non-residents, for sure, but the policy would have made better sense by also emphasizing the economic dimension of the approach. By the same token, Mauritius should create the feasible environment for them to undertake projects which will have long term favourable consequences for the economy.
So far, the want of economic expansion of the type and size required has impacted negatively on the cost of living of those at the lower rungs of the economic ladder. Many have seen their prospects of owning a house recede as property prices have kept going up due to emphasis on real estate development. It would have made sense for the government to bring out a better balance by keeping the cost of living of those lower down at reasonable levels.
More than anything, the budget today needs to pick up on the social priorities that have taken the backseat for too long now. A balanced social development acts as a guarantee for stable economic growth. Rash policy actions pursued last year have even deprived honest citizens of their lifetime savings. A signal is needed that we’ll not see a repeat of such stupid actions. If that is done, the new Minister of Finance would have redeemed the government from the hole it was sinking into. That will also give the population the trust and confidence that, after all, some in the political class of the country care for them.
* Published in print edition on 29 July 2016