“The government is focused on political survival at all costs. Who cares about good economics?”

Interview: Vinaye Ancharaz

* ‘The Labour-MMM alliance has come out stronger from the ordeal. They now have a third partner: the people’

* ‘The adverse public reaction against the PMSD could do quite a bit of collateral damage to the MSM and a future MSM-PMSD alliance’

In this week’s interview with the Mauritius Times, Vinaye Ancharaz, an International Economic Consultant and a keen observer of local politics, offers insights into recent developments, particularly the departure of the PMSD from the Opposition alliance. He analyzes the potential ramifications for the political landscape leading up to the next elections, highlighting shifts in alliances, voter sentiments, and the economic implications of government spending. Vinaye Ancharaz also emphasizes the importance of fiscal responsibility amidst calls for increased social benefits and encourages voters to assess proposed policies based on their long-term sustainability and impact on welfare.

Mauritius Times: As an attentive observer of local politics, how do you interpret the recent departure of the PMSD from the Opposition alliance, and what implications do you foresee for the political landscape leading up to the next elections?

Vinaye Ancharaz: I think it is fair to say that the writing was on the wall. The three parties have been negotiating for more than a year, and both the Labour Party and MMM made numerous concessions to the PMSD to keep them in the alliance. This was done to preserve unity among the parliamentary opposition parties in the fight against the tyranny of the MSM in the upcoming elections.

However, the PMSD had a joker up their sleeve – for they knew that the MSM was secretly wooing them. It appears that they ultimately yielded to the lure of power and money. If that’s indeed the case, then it’s regrettable, but the Labour-MMM alliance remains solid and both leaders have vowed to work together diligently to make their Labour Day meeting a success and, thereafter, focus on the general elections.

Xavier Duval has said that his party will consult with a variety of extra-parliamentary party leaders, including Roshi Bhadain and Nando Bodha, in their search for potential partners for a future alliance. I believe this is just eyewash. The PMSD’s choice has already been made. Expect to see the Duval clan on the same electoral platform as the MSM.

* In your assessment, how might the departure of the PMSD from the Opposition alliance affect the balance of power between political parties and coalitions, and what ripple effects could this have on electoral outcomes?

I believe the departure of the PMSD is ultimately a good thing for the Opposition alliance. It removes the lingering uncertainty about the sharing of tickets and key positions in a future government and allows the Labour-MMM alliance to embrace other political partners, including some of those who quit the PMSD following their exit from the Opposition alliance.

In fact, the ongoing wave of resignations from the PMSD, and potentially more to follow, has significantly weakened Duval’s party. So, if the MSM thought that they would destabilize the Opposition alliance by luring the PMSD away, they in fact ended up scoring an own goal!

The Opposition alliance has only been strengthened, and the negative publicity and adverse public reaction against the PMSD could do quite a bit of collateral damage to the MSM and a future MSM-PMSD alliance.

* How do you believe the potential realignment of political forces, particularly with the involvement of the PMSD, will shape the discourse on key issues such as governance, accountability, and socioeconomic policies in the election campaign?

I am afraid that governance and accountability will slide back further with the PMSD joining the MSM. Let us not forget that the PMSD quit the MSM-led government in 2016 over their disapproval of the Prosecution Commission, which was widely perceived as a tactic by the MSM to bypass the DPP’s Office, one of the rare institutions that refused to bend to their diktat.

Last year, when the Financial Crimes Commission bill was being debated in the Parliament, Xavier Duval as the Leader of the Opposition vehemently argued against it, saying that it was a ghost of the still-born Prosecution Commission, except more devilish in its form and intent. Now, with the PMSD likely partnering up with the MSM, there is a feeling in the public that Xavier Duval has made a dramatic U-turn to embrace something that he fought with all his might in the past and until recently.

Duval had also systematically decried the waste of public funds, the rise of corruption and nepotism, and the decline of democratic standards that have become endemic during the MSM’s reign. He was himself constantly a target of the Speaker of the House, but cleverly outmanoeuvred the latter’s ploy to expel him from Parliament on numerous occasions. Kudos for that!

Duval did a fine job as the Leader of the Opposition but that now raises a thorny question: how will he stand on the same platform and defend the party that he relentlessly attacked over the past three years?

* With the PMSD’s departure from the Opposition alliance, how do you anticipate this affecting the Opposition’s ability to effectively challenge the MSM-led alliance?

I am convinced that the Labour-MMM alliance has come out stronger from the ordeal. They now have a third partner: the people. And the people are all too aware of the MSM’s dirty tactics to harm or weaken the Opposition alliance.

More will surely come as the MSM will leave no stone unturned as they head into the elections. They have deep pockets, the MBC, and the entire government machinery at their beck-and-call. While substantial portions of the population are already appalled by the government’s unethical political maneuvers, these actions are beginning to influence the mindset of many undecided voters and MSM supporters, who won’t hesitate to punish the MSM-led alliance.

In the ex-Opposition alliance, Duval had taken the responsibility to lead the work on the alliance’s electoral programme. It appears he might have purposefully delayed the work. With the PMSD out, the Labour-MMM alliance is gearing up to deliver a strong ‘projet de société’, some elements of which – such as the appointment of an impartial and respectful speaker, replacement of the FCC, promise of a decent retirement pension and its protection against inflation, etc. – have already been highlighted. The programme will lay out the Opposition alliance’s vision for a better Mauritius, a stronger democracy and a more secure society that will surely appeal to the wide public.

The Opposition alliance, as both its leaders have repeatedly said, represents the last rampart – the last hope – against a regime with totalitarian tendencies. Ultimately, the MSM could have sowed the seeds of its own downfall. Its highhanded tactics are backfiring, and people are afraid to hand the country back to the MSM for a third term in a row – something that has never happened before and must not happen in a living democracy.

* In light of the shifting alliances, how do you envision the role of smaller political parties and independent candidates in influencing electoral outcomes and potentially shaping post-election political scenarios?

The Opposition alliance has made room for like-minded parties and people to join in. It is expected that a group of the PMSD-leavers will form their own political party and seek a spot on the Labour-MMM platform. They are welcome. There is also speculation that ReA might join the alliance. However, there are obvious limits to the Opposition alliance’s wish and endeavour to expand political representation.

Outside mainstream alliances, there is little room for smaller political parties and independent candidates to make any major impact on the poll. Despite calls by emerging parties to reject traditional ones, it is clear that the latter will dominate the local political landscape for many years to come. There is no arguing that our political culture must evolve to accommodate smaller parties with good promise, but any change takes time, and culture shifts take longer.

However, one way in which smaller parties and independent candidates can influence the electoral outcome is by causing votes to be dispersed. If this happens at the expense of the Opposition alliance, there is a risk that it might benefit the MSM-led alliance. If I may seize this opportunity to address the voters, I’d like to convey this message: If you love your country and desire change from the current MSM government, I urge you to vote responsibly. Vote for the party/alliance that offers a viable alternative. While it may not be perfect, it stands as the best available option for progress. there is none better.

* On the one hand, the ongoing political manoeuvring and shifting alliances have diverted attention from the most pressing economic challenges facing the country. There are indications of further initiatives in terms of freebies and populist social measures in the forthcoming budget. Are you concerned about the potential impact of increased government spending on the country’s finances and public debt, especially considering the uncertainty surrounding the financing of measures such as salary and pension increases?

I am very concerned about the impact of populist measures on the country’s finances. The recent pension hike has added over Rs 10 billion to the social security budget, which accounts for one-third of the government’s recurrent expenditure. The increase in the minimum wage will have an additional impact on the public sector wage bill.

Moreover, the Rs 2,000 that will be paid out of the CSG, and the government’s promise to assist small and medium enterprises (SMEs) which are incapable of paying the increase in the minimum wage, will further compromise government finances. Finally, the restructuring of salaries to maintain balance and relativity following the minimum wage adjustment will impose an added burden on both the government and the private sector.

Besides their impact on the public budget, the increases in pensions and in the minimum wage, and the upcoming salary adjustment, will result in a surge in liquidity, which could fan the inflation fire. I have said it repeatedly that we have entered an inflationary spiral where we are perpetually chasing inflation. That is, the rising cost of living is leading to calls for higher pensions and wages, and these in turn are driving the inflation rate up…

It seems that the government is happy with this situation. It is collecting significant amounts of inflation tax which it is distributing to the population. The beneficiaries are also happy because many of them hardly realize that they are under the spell of the money illusion, that is, the extra money they got is in fact worth much less because, in the meantime, prices have shot up.

Now, as you indicated, in an election year, the MSM government will surely roll out a slew of other perks and freebies to different segments of the population. Already, recruitment in the public service and in the police force is revving up; taxi licenses are up for grabs and new financial incentives may be forked out to taxi drivers, farmers and fishermen, the youth, and the newly wed.

Sociocultural organizations may receive bigger subsidies while taxes on petrol may finally be reduced. Significantly also, there is growing expectation in the public sector that the PRB report may be released this year itself ahead of the elections.

All these popular and populist measures will take a toll on the budget and potentially on the national debt if recourse is given to borrowing. But even if the government could find the resources to pay for the freebies, one should ask: is this the best way to spend the country’s cash?

* In your perspective, what strategies should be implemented to ensure fiscal responsibility and sustainable economic growth amidst the temptation to adopt popular but potentially financially burdensome social measures?

Following the completion of the 2024 Article IV consultations, the IMF released a press communiqué calling on the Mauritian authorities to implement a “growth-friendly fiscal consolidation plan” centred around reducing the public debt and rebuilding fiscal buffers (by reducing current spending and increasing tax collections). The full report will likely include clear guidance on what could be done to achieve fiscal consolidation.

In this election year, however, the temptation to overspend and under-tax will be high. The IMF has warned against such fiscal irresponsibility. So, while in practice, the IMF’s recommendations are fair and feasible, the government will do the exact opposite. The latest wave of populist measures suggests that the government is very short-term in its outlook. They are focused on political survival at all costs. Who cares about good economics? The danger is that the next government will inherit an economy buffeted by spending overruns, empty buffers, and high inflation.

* How do you propose balancing the public’s demand for increased social benefits with the necessity to uphold fiscal discipline and prevent further escalation of the country’s debt burden?

Balancing the demand for higher social benefits and fiscal discipline involves a simple equation. Social benefits are paid out of taxes, which means they are a redistribution of income from one segment of the population to another. For example, retirement pensions are paid out of taxes paid by the working population. The increase in the minimum wage will partly be paid out of the CSG; another part may come from taxes on petrol, which have withstood popular criticism, and hurt low-income earners the most. If the national pie (GDP) is not growing fast enough, such redistribution will cause frustration among taxpayers, typically the middle class.

The trick is to promote healthy economic growth; yet, by the end of 2023, we have only managed to recover from the pandemic when GDP fell by a staggering 15%. This is evident in the IMF’s statement: “Rapid growth was sustained in 2023…with output now having exceeded its pre-pandemic level” (emphasis added). In other words, the government went on a spending spree when we were just recovering from the pandemic and growth was fragile. This is utterly irresponsible.

To redistribute income, we must create it first. Else, we will be creating frustrations. That is what the MSM government has done. They have created a semblance of a ‘feel good factor’ by giving away to some while leaving others frustrated.

* From an economic standpoint, what critical factors should voters take into account when assessing political parties and candidates in the upcoming elections, particularly concerning their economic platforms and proposed policies?

The effectiveness of any proposed policy measure must be judged on the basis of a two-question test. First, is the proposed measure Pareto-efficient (that is, will it improve aggregate welfare by making everybody – or a large majority – better off)? Second, is the proposed measure sustainable (that is, does it improve current welfare at the expense of the future generation’s welfare)?

It is clear that most of the popular measures announced by the government recently will fail the test badly. The pension hike, for example, is clearly not sustainable, especially with the replacement of the NPF by the CSG. Unlike the NPF, the CSG is not a fund, and it does not guarantee that there will be money left in the pot to pay pensions to those who reach 60 in the future.

Moreover, many of the bling-bling infrastructure projects that have brought a false sense of ‘development’ in the country have been financed by debt, which will have to be paid by our children and grand-children. These projects are intergenerationally unfair.

I urge voters to judge the socioeconomic programmes of different political parties or alliances not in terms of who offers the most but who passes the Litmus test above.

Mauritius Times ePaper Friday 19 April 2024

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