Our public debt has already exceeded 90% of GDP – 60% being considered acceptable and sustainable – and is probably coursing inexorably towards 100% as some analysts are apprehending. How did we reach here?
If it hadn’t been for the pandemic, probably the public finances could have buffered the white elephant projects that the government had undertaken. But the pandemic, and the undercover business deals that it engendered, have hastened the piling up of our national debt. It is characteristic of any new regime to think that it is a know-all and is the broom that will sweep clean, and does not need any inputs or advice from outside or outsiders. Again, that is fair game under normal civilian circumstances. However, nothing has been normal since the WHO declared a Global Public Health Emergency and then an unfolding epidemic at the beginning of last year.
When government set up a bailout mechanism for the business sector, namely the Mauritius Investment Corporation Ltd (MIC) at the Bank of Mauritius, experienced and knowledgeable citizens with the country’s interest and image at heart had expressed themselves on the matter. Thus, in an interview to this paper at the time, former Minister of Finance Rama Sithanen had remarked: ‘The Minister of Finance simply has no choice than to depend on the two reserves of the Central Bank… All countries are doing it – from the US and the UK to the EU and Japan. However he must be responsible and these must be included in a standalone and robust Act of Parliament with key safeguards, oversight, supervision and control… A Special Economic and Finance Committee of the National Assembly with the Minister of Finance as Chairperson and experienced MPs such as Paul Bérenger and Xavier Luc Duval (both former Ministers of Finance) and the leader of the Opposition as key members of that Committee during the next four years to oversee the use of these funds, its supervision and monitoring.’
Had this been done, the country could have been spared the quasi-lashing that it has received from the IMF, although the full report is yet to be made available. The recommendation to ‘further improve the BoM credibility’ means what it means, especially when the next recommendation is that that the BoM ‘should relinquish ownership of the Mauritius Investment Corporation (MIC).’ What has been the object of much concern and worry to even the layman is the secrecy that has shrouded its disbursements, as an article in the last issue of this paper highlighted: how much, to whom and under what terms should have been a self-evident imperative where our accumulated savings and reserves are being handed out at such levels, and which is in line with the observation made by Rama Sithanen.
It would be recalled that following the financial crisis of 2007/08, similar generous bailout packages were handed out to banks and businesses with no mechanism for monitoring and follow-up. Instead of the employees benefiting, it was the CEOs – of the banks in particular – who received golden handshakes! And locally one business venture in the IT sector saw its promoter simply vanish, leaving the authorities powerless to initiate any action to recover what had been advanced.
In light of what has happened both elsewhere and locally, the overriding objective remains the need to put in place proper safeguards and strict conditionalities to ensure that public money is used judiciously and channelled towards the public interest. Government assistance should serve three goals: (1) make sure people’s basic needs are met, (2) make it possible to prevent economic collapse and speed up economic recovery post lockdown, and (3) use these funds to create positive change, and rebuild areas we previously neglected.
From an economic perspective, it is clearly more efficient to provide support only to the people and business sectors that really need it, or have lost income and would not be able to support themselves and, moreover, depending on the longer-term importance of these sectors to the people and the national economy.
On the other hand, like the IMF, the people too will await impatiently what measures the government proposes to take to reverse the debt burden and launch the economy towards recovery.
* Published in print edition on 14 May 2021
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