The Big Budget Bluff


Ignoring critical IMF recommendations, such as to rebuild fiscal buffers and restore prudent macroeconomic management, the Budget risks compromising economic stability and the country’s credit rating

By Vinaye Ancharaz

Every Budget since this regime’s first – in 2020 – has had a decisively overt populist flavour and, as such, the population has gotten used to a generous shower of perks at every Budget speech. With elections on the horizon, the 2024-25 Budget came with pent up expectations; ultimately, it turned out to be a huge disappointment. To be fair, it doled out a string of ‘social measures’ to various segments of the population, but many were left hungry for more. And middle-income families, the government’s cash cow, were tossed some measly crumbs. The Budget had promised to focus on the economy, on social welfare, and on the environment, but it failed miserably in boosting economic resilience or creating a ‘feel-good’ factor.

Inflation has fallen from 10.8% in 2022 to 7% in 2023 and is projected to fall further to 4.9% this year. However, a drop in the inflation rate should not be confused with falling prices. It only means that prices will keep rising, albeit at a reduced pace. Moreover, the inflation forecast of 4.9% does not consider the effects of the budgetary measures, which will increase liquidity in the economy, and cause a further degree of inflation…”

There were some positive measures and a few innovative ones, such as the 2% CCR levy on companies, and the setting up of a Climate and Sustainability Fund (CSF), to finance climate change adaptation and mitigation projects. While a modest start toward rallying the Rs 300 billion needed to meet the country’s climate needs, this will still leave a financing gap of about 1.6% of GDP per year over 15 years, according to IMF estimates. This amount must be mobilized from global climate funds and by novel instruments such as green or blue bonds. The Budget, including its annexes, failed to make a statement on the future of climate financing in Mauritius. Read More… Become a Subscriber

Mauritius Times ePaper Friday 21 June 2024

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