Summing up of Budget 2019-20: Justifying irresponsibility

By Rattan Khushiram

After the two exceptional contributions on Budget 2019-20 – the first being the well-researched intervention by the Leader of the MMM in the National Assembly, and the second the thorough analytical paper of Sushil Khushiram published in some leading newspapers –, the Minister of Finance had to respond with the authority of a man that the high position of Minister of Finance (MOF) demands and the sanctimony of someone who believes in a clear vision of the economy, its programmes and policies and the drive to nudge the debate forward with verve and clarity.

But unfortunately, it was not to be so. Instead of a composed “Chancellor of the Exchequer” refuting each of the arguments of his critics pointedly with tact and savoir-faire, we had the politician pillorying with inflammatory rhetoric his opponents. Why such aggressivity? Is it because of the latest intelligence reports that the budget, despite the plethora of sops and giveaways, would not have been well received by the population — a crisis of expectations that seems to have unnerved our MOF?

The MOF had his rosy story about the economy and its challenges all ready for the summing up, well bent on not letting the facts and figures get in the way of a good story. It played fast and loose with statistics and lapsed in historical amnesia wherever it suited his narrative. During the previous government’s tenure, the narrative went, reckless spending and policy paralysis plunged the country into terrible financial trouble putting jobs and livelihoods at risk. When the new government took charge in 2014, it got a grip on the economy which was in tatters. The MOF carefully reeled out selected numbers to show how the government would have outperformed the previous government in the last few years with respect to inflation, Gini coefficient, doing business indicators and restoring confidence in the economy.

“The MOF has often made reference to the fact that the country is booming with construction activities and there are ongoing projects all over the island and that the country has become a “vaste chantier”. That is the main thing that differentiates this regime from the previous one. This has become a slogan of the government which, however, is not confirmed by the figures. The previous regime, even without consequential grants, fared better in terms of average investment rate, private and public sector investment and central government’s capital spending over a five-year period…”


Thereafter the MOF very rapidly moved to other topics where he was more at ease and had an axe to grind dredging up old recriminations while shrewdly glossing over

  • the catastrophic figures of net exports which have reached a low of -15% of GDP,
  • the negative employment creation in 2018,
  • the government’s inability to address youth unemployment and precariousness of employment among young graduates,
  • its failure to raise the pitifully low savings rate that would reduce the country’s reliance on unproductive FDI,
  • the three consecutive years of negative export growth,
  • the failure to reduce wastage and address weaknesses identified by the Director of Audit year after year,
  • the ineffectiveness at containing the rise in recurrent expenditures, and
  • the irresponsible budgets that fail to shrink our ballooning public debt.

If the MOF had taken the pain to compare the main indicators over the two periods as shown below, it would have taken the wind out of his sails and helped to tone down, to some extent, the smugness.

Comparative Indicators

Average as % of GDP 2010-14 2015-19
Investment rate 22.0 18.2
Private Sector Investment 16.7 15.5
Public Sector Investment 5.3 5.0
Capital Spending in Budget 3.6 2.4
Budget Deficit 3.7 4.1
Saving rate 13.4 12.6
Average as %    
Growth rate 3.8 3.5
Exports growth 4.7 -0.4

We are all aware of the short memories of politicians and their habit of stretching the truth. When they are in the opposition, it is a totally different story. It is ironic that it is Sithanen who is now finding that the budget deficit for 2018-19 is around 7% of GDP as it was the tandem Sithanen-Mansoor who first created the Special Funds in the 2007-2008 budget and since then we have been denouncing the successive budgets’ tricky tricks and the colourable accounting.

Similarly in his intervention in the National Assembly in 2009 on the 2010 budget, Hon Pravind Jugnauth, then sitting on opposition benches, raised the issue of the off-budget Special Funds: “Au début de mon intervention j’avais parlé de fonds mirobolants, portant des noms ronflants, mis sur pied depuis 2008… Ces fonds, je l’ai souvent dit, M. le Président, avaient été créés avec deux objectifs. Premièrement, pour masquer l’échec sur le Capital Investment et, deuxièmement, pour manipuler le déficit budgétaire.”

He even quoted a budget deficit figure of 6% of GDP for the 2010 budget. Did the IMF publish any such figure in 2010? Actually, in the 2019 IMF’s Article IV Report, the IMF has included the Special Funds in calculating the budget deficit which is shown in Table 2A and 2B of the Report as the Consolidated Balance. The MOF does not seem to be aware that the 2019 IMF Report on Mauritius does draw attention to “public debt statistics that do not factor in borrowing outside of the central Government”, and calls for improvements in fiscal transparency, notably by the adoption of the International Public Sector Accounting Standards (IPSAS).

The MOF has often made reference to the fact that the country is booming with construction activities and there are ongoing projects all over the island and that the country has become a “vaste chantier”. That is the main thing that differentiates this regime from the previous one. This has become a slogan of the government which, however, is not confirmed by the figures. The previous regime, even without consequential grants, fared better in terms of average investment rate, private and public sector investment and central government’s capital spending over a five-year period. Even if we selectively choose the statistics that support their point of view, we cannot prevent critics poking holes in the “chantier” slogan which seems to be just a light drizzle of investment compared to the downpour during the previous regime’s tenure.

On the drawing of Rs18 bn from the BOM and external debt pre-payment to bring down the public debt, the MOF totally skirts the issue and all his ramblings about such and such transfers carried out by so and so were in line with the Bank of Mauritius Act and there were no such raiding of the bank’s Special Reserve Fund. We believe that the MOF should backtrack on this controversial measure. Government should instead acknowledge its inability to meet the debt ceiling target by June 2021, and extend the deadline by another 2 years to June 2023. In fact, the statutory debt ceiling has already been missed twice, once in 2013, by the previous Government, and again in 2018.

The Mauritian authorities have built up over its short economic history a reputation for economic competence. Although they have presided over some debacles in the past, they at least had a clear vision for the economy and have always had a record of sound macro-economic management, especially in terms of fiscal rectitude and the containment of the country’s public debt. Unfortunately, economic management has today turned into economic irresponsibility.


* Published in print edition on 28 June 2019

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