Despite lack of garde-fous, ceilings or sunset clauses, Government have granted the Finance minister carte blanche for engineering an economic reconstruction that should be guided by the national interest.
By S. Callikan
With the Covid-19 pandemic under reasonable control and deconfinement looming, all attention will necessarily be focused on the handling by authorities of the social and economic crisis and the upcoming budget of the new Minister of Finance and Economic Development (MOFED). If it is true that the “exceptional circumstances require exceptional measures” and that nothing should be taboo or off-limits, Hon Padayachy, without under-rating the challenges ahead, will have a grandstand opportunity to rise and make his place if not in history, then in popular imagery.
On the plus side, he is himself a recognized economist, has been in the corridors of power and has an experienced team of cadres at MOFED which should ensure that early missteps, perhaps through over-reliance on outside advisers, will have been curbed. Government has also acted swiftly through the Covid-19 omnibus Act rushed through Parliament, giving the Minister unprecedented leeway with public debt management and the Central Bank (BOM) foreign exchange reserves.
Despite the strong reservations that have been voiced out and the lack of garde-fous, ceilings or sunset clauses, Cabinet and government MPs have granted him carte blanche and an exceptional elbow room for engineering an economic reconstruction that should be guided by the national interest.
We hear of the Rs 18 billion of BOM notional special reserves (somewhat equivalent to printing the money), the “one-tranche” Rs 60 billion being transferred from BOM forex reserves to government current expenditure coffers, the Rs 50 billion reportedly asked from WB/IMF, the Rs 8 billion from African Development Bank, the Rs 14 billion of one-year import credit facility from the Saudis. Until the budget details, we as yet have no information whether more unknown billions, again from BOM, will be injected into the economy through equity participation. Much of that could perhaps be earmarked for reviving the national carrier currently in receivership. Total fund availabilities might represent quite a high percentage of our faltering GDP at the disposal of a Finance minister, who despite the exceptional circumstances, will not be struggling to make ends meet but on how and where best to guide and prioritize government’s intervention.
Prudence dictates that the minister does not use this massive boon, born of our collective savings and paid for by future generations, in one fell swoop. True it is that some sectors, most particularly in travel, tourism, hostelry, entertainment and allied services may need swift prop-up intervention. That should of course be commensurate with countervailing owner equity injections where establishments have recorded ample previous profits, reserves and paid-out dividends.
The Minister would also be inspired to heed calls for intelligently bargaining injection of public funds against some form of non-executive participation in those fundamentally sound private concerns queuing up for assistance, while making the tough calls for enterprises that were non-viable even before Covid-19. But as uncertainty hovers about the length, depth and duration of disruptive economic and social conditions, or about potential unknown shocks down the road, the Minister should be wise enough to keep some of the ammunition at his disposal dry and safe, to be spent over 2-3 years.
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Leading by example: Pay cuts for MPs & higher establishment
The Minister of Finance and ultimately the government will be judged by the effectiveness and efficacy of his budgetary measures, their social and economic fairness, and the understanding he shows for the vulnerable, the self-employed and the thousands of micro, small and medium enterprises that constitute half of the productive fabric of society. It is not only about the corner shops, the local barbers and hairdressers or the street food merchants that all need to re-open rapidly. Nor is it just about all the workers and small contractors who need to ply about their mechanical, building or maintenance trades without waiting for Work Access Permits or queuing for government handouts.
For instance, collateral-free loans of up to a million rupees, with minimum red-tape, and reductions in various rates, levies and duties, even for a specific period, could provide effective relief in the mix of alternatives to be explored for the sector. The Modi government has reportedly reserved an astounding 15% of the Indian economic bail-out package to precisely those ends.
With some safeguards, even 10,000 such loans at an average of Rs 200,000 with a decent moratorium, would barely cost the exchequer Rs 2 Bn, while they may revive post-pandemic reconstruction and boost many traditional sector small-scale entrepreneurs. A similar hassle-free amount could be earmarked for start-ups in new or emerging sectors, unlocking their potential, generating employment or future revenues to start pay-back.
Food security during the lockdown has rightly brought home to many urbanites how much of our fine herbs, spices, root crops and green veggies we can all grow in our backyards or even in a battery of drums. Some might also have realized the hardships exacerbated by closed markets and ruthless intermediates, even as farmer produce was sometimes rotting in the fields. A hardy few have even erected a simple gravity-fed space-saving pipe system for home hydroponics.
The Minister could dwell on how much we owe those fishermen, vegetable growers and small animal breeders who toil seven days a week to attend to our food security needs in ways that few of our conglomerates could. Coming out of the pandemic crisis should be an opportunity for a bold series of budgetary measures to energize, expand land availabilities, provide seedlings, compost, fertilizers, or meaningful technical upgrade opportunities into sheltered farming and, perhaps more importantly, provide them with greater security.
The exceptional circumstances and hardships endured by ordinary citizens during the sanitary lockdown has starkly placed in perspective the lifestyle, salaries, perks and privileges of the governing elites against the realities of those dozens of thousands of self-employed to whom a meagre monthly allowance of Rs 5,100 was handed or those hard-working families who make ends meet on joint salaries not exceeding Rs 25,000.
It is demeaning to read about sanction-less billions squandered in dubious loans, wasted in massive failures or regularly denounced by Audit Reports that gather dust on shelves. Empathy for the struggles most Mauritians are enduring and the jobs that look likely to be axed, calls for exemplary public finance management and an exceptional sense of solidarity from the highest echelons.
New Zealand PM Jacinda Arden summed it aptly that cuts in lavish top-echelon salaries, while not material to government budget, were all about empathy, solidarity, symbolic burden-sharing and leadership by example in such difficult times. Locally, the nominal 10% cut in ministerial basic salaries, which can be recouped in tax returns, can certainly be improved upon as many leaders round the world have demonstrated.
No Opposition party would be necessarily averse to a cross-party fundamental review of salaries, allowances, perks, privileges and pensions of higher establishment. Social and political consensus could earn the required qualified majority in Parliament. In this unique opportunity, will the Minister of Finance have the appetite and social fibre to make the overtures on that front and drive an overdue slimming regime?
* Published in print edition on 26 May 2020
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