In the wake of the coronavirus pandemic, which has created an economic crisis “like no other” as averred by Kristalina Georgieva, managing director of the IMF, governments across the world have made available extensive financial packages to support employees, save jobs and prevent economic collapse with assistance to businesses and large corporations. Central banks have also intervened and decreased their lending rates to almost zero. The sizes of the support packages of rich and less rich countries are record-breaking – trillions of dollars of public money that will go to most sectors of their economies.
If only governments have the financial muscle to come up with such gigantesque assistance programmes, public opinion here and abroad has been voicing out 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, it has been argued in these columns, 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.
The Mauritian government has come up with the Mauritius Investment Corporation Ltd, which will be set up by the Bank of Mauritius as a Special Purpose Vehicle under its aegis with an initial “ONE-OFF exceptional contribution of Rs 60 Billion” by the Central Bank. The objective of the MIC is “to mitigate contagion of the ongoing economic downturn to the banking sector, thus limiting macro-economic and financial risks”. The MIC, which is being established by the BOM under Section 6(1)(y) of the Bank of Mauritius Act, will operate “independently within the parameters of a strict governance structure”, and will have the responsibility of providing “through a range of equity/quasi equity instruments in view of ensuring that domestic systemic economic operators are kept afloat…”. As yet, it is not known what are the conditionalities that will be applied for the disbursement, the composition of the decision makers within the MIC and their credentials.
Former Finance minister Rama Sithanen mentioned in an interview to this paper, before the announcement of the setting up of the MIC, that besides the elements of fairness and prudence that should inform the decision-making process as regards government support, the Government should ensure that proper safeguards are put in place: “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 Berenger 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.”
As it is, the MIC is a creation of the Bank of Mauritius – not of our legislative process, and as such it will fall outside the purview of parliamentary supervision. This is not to cast doubt on the credentials or competence or integrity of the decision makers within the MIC. But we are talking here is about an astronomical amount of money, the utilisation of which will be spread over the next years before the next elections.
To the focus of governments across the world during the present testing times, namely to ‘save lives and fix the economy’, there might be a third objective, which politicians would be averse to admitting: winning re-election. To be fair, this is in fact what probably any government would strive to do in the present testing circumstances when they are working out different kinds of assistance programmes to save their economies and provide relief to their populations.
As regards Mauritius’ handling of the pandemic and its consequences, the medical challenge appears to have been met. One cannot exclude that the reasoning within the political establishment is that winning the second battle will take care of the third challenge, that of winning a second round at the next polls. Sure enough, there is still a long way to go. But injecting the initial capital inflows in the form of bailout packages and giving support to other sectors – all of which to be drawn from a war chest of such magnitude, followed up by spreading the disbursements over the years till the approach to the elections, might well be perceived as a strategy equivalent to the adoption of popular measures that brought the regime to power. Time will tell.
* Published in print edition on 26 May 2020