Is Government out of Its Depth?

It is in times of crisis that the managerial acumen of the government is put to test. The onus is squarely on government to prove its mettle or face public sanctio

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By Mrinal Roy

Across the world people are suffering from the continuous erosion of their purchasing power caused by the constant rise of prices of essential goods and commodities fuelled by the disruptions to trade and escalating costs in the wake of the Covid-19 pandemic and the sanctions imposed in the context of the ongoing war in Ukraine. They are therefore clamouring for concrete actions from governments to mitigate the dire impact of the unabated rise in the prices of groceries and their existential needs on their wallet.

The World Bank has warned that the war in Ukraine is set to cause the “largest commodity shock” since the 1970s. The war and the adverse impact of sanctions have already significantly increased the prices of fuel, natural gas and essential commodities such as wheat, flour, cooking oil and cotton. The surge in fuel and food prices are hitting low-income populations and people in developing countries hardest. There is therefore a general pushback of people across the world against the unchecked rise in prices of food and basic existential needs.The IMF has forecast that owing to the impact of the war on essential commodities, inflation is expected to rise to 5.7% in advanced economies and 8.7% in emerging market and developing economies.

It is therefore not surprising that the erosion of purchasing power was at the centre of people’s concerns during the recent French Presidential elections and the 1st May Labour Day rallies and protests across Europe. It could be a determinant factor in the forthcoming legislative elections in France in June.

Ivory towers

Consumers shopping in supermarkets and retail outlets in the country are buckling under the constant rise of prices of food and groceries since the outbreak of the Covid-19 pandemic in March 2020 as they navigate through different sections in search of the best deals commensurate with their budget. Are Ministers and the government in Mauritius so cut off in their ivory towers from the ground reality that they are unaware that more and more people in the country are enduring tremendous hardships to buy their essential groceries and existential needs owing to the continuous erosion of their purchasing power caused by the unchecked depreciation of the Rupee and the sustained rise of prices of groceries and basic commodities due to the compounded impact of the Covid-19 pandemic and the ongoing war in Ukraine? Some 47.8% of the employees in the country earning up to Rs15,000, the senior citizens dependent on their basic pensions and the poorest households are particularly affected by the price increases as they spend a larger share of their income on basic existential needs such as food and energy.

Has government lost the plot?

People and in particular the most vulnerable therefore expect government to take urgent corrective actions now to alleviate their present existential difficulties and distress. In response, they certainly did not expect government in parliament to tom-tom about the mixed bag of past social and other measures including the payment of the 2016 and 2021 PRB awards, free tertiary education in public institutions or the subsidy on the purchase of water tanks costing Rs 112 Billion of public funds, taken by government during the period December 2014 to June 2020.

After a week of deliberations, government mainly came forward with nothing better than a subsidy of Rs 150 million to maintain the prices of seven products (canned fish, canned tomatoes, cheese, edible oil, margarine, milk powder and pulses) at the current level up to 30 June 2022. This is a far cry from the billions of Rupees of public funds advanced in total opacity from the Mauritius Investment Corporation to bail out distressed Corporate conglomerates and private companies or the wide range of support measures granted from public funds to smart city projects, the tourism and sugar cane sectors and other sectors to keep them afloat.

How can such a stopgap measure help alleviate the current distress and hardships of consumers? Instead of reducing the cost of groceries of households, this questionable government policy of recurrent subsidies basically comforts the profits of retailers and supermarkets. Is VAT collection to shore strapped government revenue at the expense of consumers a determinant factor in government decision-making? Has government lost the plot?

The current economic crisis requires competent currency stabilizing measures to protect consumers, a more rigorous price control by the authorities and an unequivocal solidarity from commercial partners, supermarket companies and retailers to help consumers tide over the crisis. Supermarkets offer significant price reductions of 14% to 34% or more every fortnight on a range of food and other products which attest to the wide price flexibility they have. At this critical juncture, why can’t the supermarkets and retailers be asked to keep the prices of groceries and essential goods at the discounted prices during the enduring crisis faced by consumers?

Double standards

However, what particularly riles people is the double standards prevailing in the country. It is galling that mainstream citizens and the people are made to bear the brunt of unchecked and continuously rising prices over the last two years while the wastage of public funds and costly blunders amounting to tens of billions of Rupees of public funds continue unabated. With the lifting of travel bans, Ministers have started flying out of the country. In the current crisis, government is expected to lead by example and be more circumspect in its spending from public funds bearing in mind the costly blunders and allegations of wrongdoings marring its tenure. The plethora of Ministers who travelled to Dubai recently in the context of the Dubai Expo 2020 and the costs thereof has raised legitimate questions from the common man. What have been the tangible benefits of these diverse ministerial missions?

In contrast, it is worth flagging that on his first international visit this year Prime Minister Narendra Modi travelled to Germany, Denmark and France on a three- day visit this week from 2 to 4 May where he had bilateral meetings with the leaders of these countries. The visit inter alia boosted ties in the areas of trade, energy and green technology. PM Modi’s visit included 25 engagements with eight world leaders, 50 business CEOs and the Indian diaspora. In Denmark, the Indian PM held separate bilateral talks with leaders of Norway, Sweden, Iceland and Finland attending the second India-Nordic Summit.

In this difficult context, it is therefore equally important that the government gets its priorities right. This is not the time to invest in costly white elephants the country can ill afford. It is also anathema for government to seek grants and financial support from friendly countries in a context of strapped public finances, to invest the funds in projects which are far from being priorities at the moment.

Is government out of its depth? It is in times of crisis that the managerial acumen of the government is put to test. Their actions are under constant scrutiny by the people. The situation is grave. The onus is squarely on government to prove its mettle or face public sanction.

Escalation

The government must also wake up to the stark reality that the new fund of $100 billion pledged by the US to provide high tech military and other support to Ukraine as well as the billions of Euros of arms and missiles provided by Europe and NATO will escalate and prolong the war and the distress caused to the civil population. There is no initiative to broker a deal to end the war. In this proxy war, the US declared intent is to weaken Russia. This objective cannot be pursued at the expense of hardships endured by billions of people across the world.

The collateral casualties of this geopolitical game plan are the beleaguered people of Ukraine and people across the world forced to endure the dire consequences of continuously rising prices of basic food, energy and prime necessities as long as the war does not come to an end.The current situation cannot go on. In the absence of honest initiatives to end the war, it is high time for the silent caucus of nations across the world to seek urgent financial support through a Special Fund set up by the United Nations, international financial institutions and the principal protagonists to mitigate the dire impact of the war in Ukraine on people across the world on a scale commensurate with their destructive war effort. The world leaders in Africa, Asia and South America must team up and act now. This is the only way.

Mauritius Times ePaper Friday 6 May 2022