“The ‘Alliance du Changement’ offers a strong foundation for the deep reforms and restructuring the country needs…

Interview: Manou Bheenick

So, Navin, Paul, and Team, put your shoulder to the wheel; pull us out of this rut; and get on with the job!”

* ‘Let there be no doubt: in 2024, our economy is weaker than it has ever been at any point of regime change, whether in 1982 or 1995’

* ‘Social transfers should not become entitlements. Our Minister of Finance should not fancy himself as Father Christmas’

* ‘SAJ, at least the Mark One version as PM, was not a rogue and renegade. Jugnauth Jr turned out to be a different kettle of fish’

As Mauritius faces a range of economic challenges in 2024, the ‘Alliance du Changement’ government is tasked with delivering on its electoral promises while grappling with limited resources. One key pledge — the controversial 14th-month bonus — has been partially capped for those earning up to Rs50,000 due to financial constraints, as highlighted in the recent State of the Economy report.

To better understand the current situation, we turn to historical lessons. How does the 2024 crisis compare to the economic landscape of 1982? What insights does the current State of the Economy report offer that the IMF or Moody’s may have missed? As the nation faces the potential threat of credit rating downgrades  and the possibility of seeking external assistance, difficult decisions are ahead. Can the current political alliances, such as the Labour Party and MMM, provide the stability needed to steer through this tumultuous period?

Manou Bheenick offers his insights into these critical issues, drawing from his extensive experience in public service, having served as Minister of Economic Planning, Finance Minister, and later as Governor of the Bank of Mauritius. His background provides a unique perspective through which to assess the current situation and its historical parallels, offering informed reflections on the political and financial decisions that will shape the country’s future.

Mauritius Times: This is the time of year when media outlets around the globe name their Person of the Year. With 2024 being an eventful year for Mauritius and in light of the clear and uncompromising verdict delivered by the electorate in the recent elections, who stands out to you as most deserving of this title?

Manou Bheenick: It is in keeping with the spirit of the times to look back and seek to identify an individual who stood head and shoulders above his peers, his countrymen, or whatever the category of people we’re talking about, during the year. This exercise rarely goes without creating a ripple or two, as is evidently the case with the old/new President of the US.

I would unhesitatingly place the Mauritian voter on this pedestal, or more precisely, the 7 out of every 10 of them who enabled us to make such a clean sweep at the polls with the Alliance du Changement walking off with every contested seat. The other 3 also deserve a pat on the back for helping us achieve such an impressive turnout. So, well done, folks!

* Yet, that same electorate, which just a few weeks ago delivered its verdict on the leadership it desires for the country, can seemingly overnight become unreasonable when it comes to monetary benefits — such as the demand for a 14th-month bonus, a benefit that seems to be non-existent anywhere else. Isn’t that surprising?

We must not blame the electorate for what would appear to be an unreasonable, or worse an irrational, behaviour. I choose to make a distinction here between their electoral behaviour and their everyday behaviour as a citizen of the country going about the ordinary business of everyday life.

They chose wisely among the plethora of political parties and alliances, big and small, old and new, which spread out their wares to entice the electorate. The most enticing for the politically naive, immature and gullible was certainly the outgoing regime which had specialised in lulling our people into a false-comfort zone, with handouts and freebies of every description, while destroying the country’s work culture, productivity, employability, and ability to pay its way in a mercilessly competitive world. The electorate turned their back on the rampage of dilapidation and depredation and won back our country from the claws of the kleptocrats who have brought it to ruins.

Once you get to the ordinary business of life, you have to contend with the bad habits of depending on the public purse in the mistaken belief that it was free and costless and could be increased and extended at the Prime Minister’s mere will and would go on forever and ever. That was the kind of public impression that was, additionally, most conducive to diverting torrents of public funds into the grubby hands of party hacks and cronies.

When the reality of cooked public accounts, bankrupt public agencies, insolvent pension funds, massaged national statistics, rising state indebtedness, widening public sector deficits, chronic elevated inflation, and continual currency depreciation all begin to sink in, the electorate must wake up to this unwelcome reality, however indigestible it may seem.

* The ‘Alliance du Changement’ government has been forced to cap the 14th-month bonus for those earning up to Rs50,000 due to insufficient funding, as confirmed by The State of the Economy report. Some critics argue that the government should have anticipated this financial shortfall. Do you think that’s a fair assessment?

The 14th month happened in the in-between zone when we are yet to fully wake up and apprehend reality. Perhaps, there are others — and not just Mr(s) Public– who need to wake up…

Then, perhaps some decision-makers have an alternate view of electoral platforms. I have always held the view that an electoral platform is much like a railway platform: it’s something to get in on, not something to stand on, if you want to reach your destination.

Anyway, the aberration of a 14^th month is done, and it doesn’t make the task ahead any easier. Many of us do regret this first blunder from a government that gave the impression that it meant business. On this score, it’s proved startlingly little different from the discredited regime it supplanted.

However, if we put on our positive-thinking hat, there’s a glimmer of hope there after all: targeting isn’t any longer such a dirty word — unlike the dirty ones of the surprisingly foul-mouthed former Prime Minister! It can come in very handy as we cope with our newly- discovered straitened financial circumstances.

* You initiated a similar exercise on the state of the economy when you assumed office as Minister of Finance in December 1995. What additional insights could that report offer — now and in 2024 — that the IMF or Moody’s did not or could not have known about the real state of our economy, both in 1995 and today?

Yes, indeed, I did. Prime Minister Ramgoolam had agreed with me to have such an exercise conducted as a curtain-raiser for our strategising over the broad lines of our first budget.

The outgoing PM had raised the stakes by promising to raise Old Age Pensions, during the last week of the campaign, and we had little choice but to fall in line to avoid electoral disaster. We were not sure whether Sir Anerood Jugnauth had provided enough leeway for such unforeseen expenditure. So, we had to take stock of the financial situation before proceeding to pay the increased pensions,

We discovered that the last budget had glossed over a massive public borrowing in the form of a Floating Rate Note and had set aside an IMF-recommended fiscal reform which would have mobilised the extra resources.The underlying economic situation was much better; national statistics were not tampered with, budgets were budgets and not an exercise in public titillation and political chicanery, the Minister of Finance was competent, there was a policy dialogue with the IMF, and ignoring the latter’s advice on fiscal strategy was an understandable policy decision in the run-up to a general election.

As for Moody’s rating, it didn’t matter all that much to us at the time as we were neither overborrowed, nor had we spun a web of lies around our public finances and indebtedness levels. A downgrading would have mattered little then; it would be catastrophic now. Its shockwave would affect not just Mauritian international borrowers but also the foreign exchange flows into our offshore business sector.

We were wrong in not providing sufficient parliamentary time for a full discussion of our State of the Economy, published in mid-February 1996. It could have benefited from a fuller discussion, rather in the manner of the British Spring budget discussions. I paid the price for that, but not before I had repaired our reputation with both Moody’s and the IMF and set in train the work that catalysed the rollout of the VAT system rapidly after my departure: I inducted a French VAT expert (the French invented this mechanism after all). I also ran into a wall of opprobrium when I minimised/rationalised the proliferating tax expenditures in the sole budget which I presented before I was hung out to dry. This facilitated the introduction of the VAT at a lower rate than would otherwise have been the case. “Après moi, le déluge” was not our mantra!

I honestly feel that we should have used the current report as stage-setting for a deeper parliamentary discussion of the issues at stake. Quite apart from aiding understanding of current economic/ financial issues within Cabinet and the Government benches, it would have helped Mr(s) Public to appreciate the complexities and trade-offs in carrying on the calamitous legacy of the last Jugnauth regime.

We had never pulled the wool over the eyes of the IMF (Fund) before 1995 and they knew the exact state of our economy then. The 1996 State of the Economy gave additional insights by lifting the veil on the policy dialogue with the institution, in particular, the ignorance of its tax advice as I mentioned earlier. The 2024 State of the Economy could have rounded up our knowledge and understanding of how this policy dialogue evolved during the Jugnauths’ last two regimes when we fielded an economic ignoramus as our Minister of Finance. This would have helped the public to appreciate and understand why we have fallen behind andhow much catching up must be done.

* What about the IMF’s insight into the true state of our economy? Could they have overlooked it?

I have no reason to believe that the Fund does not know the true state of the economy; it does but may choose not to publish some things in its published diagnosis. These would, however, figure in its ongoing policy dialogue with the country.

That’s why I regret that the 2024 State of the Economy report chose not to give us a flavour of the dialogue during the period when we introduced so many financial innovations and novelties such as laughable budgets, Special Purpose Vehicles, Special Funds à gogo to escape parliamentary oversight, pharaonic public investments, hijack of central bank reserves, government direction of monetary policy, financing private capital expenditure from money printing, resorting to export credit finance for lumpy public projects with little or no payback capacity, etc., etc.

If these went unaddressed in the policy dialogue, then the IMF was well and truly dozing at the wheel!

* In light of the 2024 State of the Economy report, what’s your assessment of how the economy is truly faring? Would you say we are facing a situation similar to that of 1982?

There is, of course, a family resemblance of sorts between these two watershed dates — 1982 and 2024 — but the events themselves differ significantly.

SAJ, at least the Mark One version as Prime Minister, was not a rogue and renegade. Jugnauth Jr turned out to be a different kettle of fish. SAJ certainly did not leave our economy, our society, or our polity in the utter shambles his son has saddled this generation with.

Sonny boy’s regime — remember, SAJ stepped down mid-term to install him in his place –has left the country deeply in debt. It has devastated parastatals and publicly-owned corporations. The regime weaponized the police, the tax authority, and, to a lesser extent, parts of the judiciary.

It bowdlerized regulatory bodies, manipulated the national books, and massaged national income figures to obscure the true reality. It resorted to money-printing with the reckless abandon of an addict craving ever-larger doses, fuelled sustained currency depreciation, and stoked chronic inflation.

Sonny boy’s regime turned Parliament into a house of ill repute, with a speaker who brought ridicule upon the institution in polite society. It brought Mauritius crashing down from the respected position we had painstakingly earned over the years since independence, in the comity of nations, diplomacy, democracy, and international performance rankings.

In summary, then, let there be no doubt that we now have a much weaker economy in 2024 than we have ever had at a time of regime change, whether in 1982 or in 1995. Stripped of the money illusion and false accounting, we are barely better off now than we were, going into Covid. Our capacity to plan and undertake policy reforms is sharply constrained by institutional weakening across the board, especially in the upper echelons of the higher civil service. We must revive and sustain our policy dialogue with all stakeholders to address national issues and facilitate buy-in.

Our fiscal position is dire. We have transformed the tax authority into a paying agent for all sorts of social support. Fiscal consolidation cannot be further postponed. It also requires a thorough review of the tax authority which we last reformed by building on its predecessor, the Unified Revenue Board, which had itself consolidated all revenue collection agencies under its purview. The Mauritius Revenue Authority is ripe for review.

Our population must rediscover the work culture and we must reduce dependence on imported labour. We must revisit our dependence on expatriates and limit real estate sales to foreigners. We cannot save our country for our people by selling the choicest parts to foreigners. Induction in Mauritian values of religious tolerance and multi-ethnic co-existence must become a precondition for residence permits to all foreigners. whether workers or investors.

In 1982, the political dimension of the regime change was a cause for some nervousness for the rare democracy that we then were in this part of the world. It was the era of one-party states. That fear is now gone. We must now consolidate our democracy with constitutional change to prevent the excesses and violations of the Jugnauths and to equip us to face the future, where we may not again have the three-quarters majority required to effect constitutional change.

We must, above all, give our people new hope that we finally have a government in place which is working for them and their descendants, and not destroying, plundering, and dilapidating national resources to enrich themselves and their cronies.

* Deputy PM Paul Bérenger, in his intervention on The Special Allowance Bill, stated that, given the current state of the economy, difficult decisions will have to be made. He also did not rule out the threat of a downgrade of the country’s credit rating by Moody’s and emphasized that assistance might need to be sought from friendly countries such as India, the US, the UK, and China, as well as from the IMF and the World Bank. That sounds like a Greek scenario – with the potential for social unrest if the expectations of the people are not satisfactorily met, doesn’t it?

Yes, it does indeed! There’s, however, a fundamental difference or two, from the Greek debacle, which we’d do well to bear in mind, to appreciate the full extent of our fall from grace.

First, the Greeks were advised by Goldman Sachs when they started on their creative accounting and extraordinary malinvestment journey which led to their perdition.

We, on the other hand, did all that, under our own steam, led by the deadly duo of Jugnauth/Padayachy, ably aided and abetted by a compliant and supine finance and economic technocracy, with celebratory headlines applauding every misguided and ill-inspired annual budget in the domestic — or, should I say? domesticated — mainstream press, while the Opposition was effectively muzzled and debate stifled, by means fair and foul, in what had become a simulacrum of a Parliament.

Mauritius was still basking in the positive glow of its inherited reputation for good management and its position as numero uno in Africa. The IMF was hypnotised and snoozed on. Moody’s, the rating agency, looked the other way.

Second, Greece was part of a currency union, the Eurozone, managed by the collective and fiercely independent European Central Bank. We had an independent, free floating, currency managed by our own central bank. We had – at least, I had – consistently fought against sustained assaults against the central bank’s policy independence and continual attempts to direct monetary policy from the Treasury.

With a complaisant and incompetent Governor and Deputy Governors, the Bank of Mauritius was an early victim of State capture. The opening shot was the hijacking of central bank reserves by Jugnauth Jr, then Minister of Finance, facilitated by Padayachy as Deputy Governor, in lieu of fiscal consolidation. This was hailed as a miracle, in a newspaper headline which should have known better, with a former Central Bank Governor also voicing his support!

The Greek debacle ended with an IMF programme in place and Eurozone support to help the Greeks adjust and purge their economy of the excesses which landed them in such dire straits. And, yes, Greek citizens paid part of the price, too, but they had the freedom to look for better prospects elsewhere in the European Union.

The upshot for us, here in Mauritius, is continued currency depreciation and currency shortage, and an unacknowledged foreign currency queuing system, which we are all experiencing. Paul Berenger is quite right here when he says we need IMF and other external support. He’s probably the only one in our Cabinet who lived throughout the 1979-82 financial crisis when the sugar boom fizzled out and we were left high and dry. He knows full well the rigours and travails of our IMF Stabilisation Programmes and the World Bank’s Structural Adjustment Programmes. Indeed, our Structural Adjustment Loan is a rare success in the genre in Africa. It was conceived and executed by us; we did not have the supine and complaisant finance and economic technocracy that has become part of our problem.

Part of the credit for the success of our International Monetary Fund/World Bank programmes of the early 1980s undoubtedly goes to Berenger as he steered clear of the facile route of denouncing them and chose instead the arduous route of convincing, first, his Cabinet colleagues, second, his party faithful, and third, the electorate, that we had to stay the course. Stayed, we did; and the results speak for themselves.

Other countries mostly take their cue from the IMF and the World Bank when it comes to their lending or other financial assistance programmes. I’m not too sure whether this includes their export credit support programmes, of the type that financed the notorious metro system. This could be more akin to the Chinese financial support for infrastructure in Sri Lanka where their unravelling/resolution of the debt burden is mostly a bilateral/ quasi-commercial matter.

The Fund will probably field a new team to work on Mauritius. Moody’s will be scrambling to catch up with ground realities that eluded it. And we, government, opinion-leaders, commentators, and influencers have our work cut out for us. And that is to coax our people (note, I don’t speak of the electorate any more, as the election is behind us) to climb down from their high expectations because the heritage left by the demolition team that we were pleased to call our government for the last decade is uncontestably the worst ever left by an outgoing regime in our entire history as an independent nation.

And, coincidentally, Prime Minister Navin Ramgoolam has not entrusted any specific portfolio to his Deputy Prime Minister. Paul Bérenger is the man to step into these shoes and help the people adjust to reality and do some much-needed mentoring and hectoring.

* Given these pressing challenges, how long do you think it will take to restore the economy to good shape?

The State of the Economy lifts the veil only on part of the damage done to our economy. I strongly suspect there’s worse to come, as we come to grips with the balance sheet of all the parastatals and state-controlled companies. Their deferred capital investments in much-needed infrastructure must be addressed as a matter of urgency if state public assets are not to lapse into decrepitude.

In parallel, waste, mismanagement, overstaffing, and corrupt practices must be rooted out, and ecosystems changed, to ensure value for money in all future investments. No more billions in boondoggles such as ventilators that do not work or procurement practices that apparently create an urge to commit suicide among procurement officers!

We must clean up our act before we spend our public money. And, we must realise, public money is our money; it comes from our tax rupees. It comes from taxes on our income, our consumption and other expenditure. It’s always better to leave the maximum of their income in the income-earners’s hands, for earned income. Capital can be taxed more to ensure fairness and achieve other social objectives. And it is better to have less government. And so on and on the list of things to be done to bring our economy to a more or less fit state, say to the state it was in 2014, is nearly endless, given the extensive damage inflicted in the last decade.

So, in effect, you’re asking me how long it will take us to do all that. Who can tell? It depends on the speed with which the Government sets about restructuring and rectifying. This, in turn, depends in the Government’s appetite for reform. And, given the nature of things to be done — some of which are more in the nature of whisking the baby bottle away from the baby’s mouth. If the expected outcry is too much, any government would shirk away or go softly softly. Which would drag out the reform and return to shape.

I think things will be a bit clearer with the Discours Programme and especially the debates around it which would help in bringing clarity in public perceptions. The first budget will be set in a more realistic context than the electoral programmes on offer only some weeks ago. The State of the Economy has clarified a few things, which had long been suspected, on the financial side. But there are lots of other issues that require a similar stocktaking before programmes can be fashioned. I give some of them pêle-mêle:

(1) the global trade environment for our export products and services,

(2) the domestic human power situation,

(3) public service and parastatal overstaffing,

(4) the skills deficit by concerned sector,

(5) the incidence of foreign labour in the formal and informal economy by sector,

(6) the competitiveness of the country in new growth sectors,

(7) the adequacy of the education sector outputs at various levels to the skills levels required by the job market,

(8) the productivity/competitiveness of domestic labour and facilities such as the harbour, cargo-handling, the airport, etc.

You can add to the list to your heart’s content by looking at what doesn’t quite work anymore in our country.

Only after sizing up the problem in all these areas, can we assess the remedial measures required, their cost and expected time for implementation…Only then can we hazard a guess about how long it would take us to get back in a fighting-fit state to take on the competition internationally, and begin to move once again in the right direction in regional or international league tables where we have recently only impressed by our precipitous fall.

I salute the decision to restore the economic planning function in the ministerial portfolio of a Cabinet member. Over the past years, we have paid a very heavy price for our failure to think and plan strategically or even just to plan our capital investments properly. These are not matters to be decided on the run by line Ministers, not even by the Prime Minister, even less by subcontracted agencies like the Economic Development Board. Major expenditure plans cannot just be left, as the previous regime did, to the bon vouloir of the clueless Minister of Finance in his folkloric Budget Speeches, yes, the self-same joker who announced the demolition of Emmanuel Anquetil Building, a fairly modern government-owned facility in the town centre, not because there was asbestos insulation in it as claimed (rightly), but in all likelihood just to facilitate renting of comparable office space from cronies, as was the modus operandi of the regime.

Now, we have a government minister charged with the economic planning function. Well and good. I would have much preferred if the Prime Minister had kept the function under his ambit in the form of a Planning Commission, on the lines of the respected and long-established Indian Planning Commission.

SSR had done something like that when he established the Economic Planning Unit in the PMO in the mid-1960s. That’s where I cut my teeth along with two others, Baguant and Foo Pak Sen Foo Fat. The EPU transformed into a full-fledged Ministry under Guy Ollivry when Gaëtan Duval’s PMSD entered into a post-election coalition with SSR’s Labour Party and the CAM partner. Armed with a four-party alliance, Navin Ramgoolam is resurrecting the economic planning function. SSR would have been proud.

* With hindsight, one could argue that the alliance between the Labour Party and the MMM — along with Resistans ek Alternativ and Nouveaux Démocrates — might be exactly what the country needs at this point to contain any potential unrest. What’s your view on this?

 I think our population has gained enough in maturity for us to discount social unrest as a possibility which we should reckon with. Unrest is certainly NOT the solution to our economic and financial predicament. Admittedly, the after-effects of the systematic abêtissement, which they underwent during the last ten years in the hands of a benighted regime, will leave some pockets of resistance and breed withdrawal symptoms among the affected population as reforms begin to bite.

We must inculcate the work habit in our population. Social transfers should not become the go-to object in life for our citizens. There was a joke doing the rounds during the last election as the outgoing Prime Minister was busy promising freebies at every political rally. A newborn will bring a harvest of state support to parents and child(ren) until age 18 or so. All that remained for the desperate Prime Minister was to bring the retirement age down to 18 – and the population would be in clover for their whole life in the Jugnauthian never never land!

Social transfers, by whatever name called, must be seen for what they are: public charity paid for by the taxes of hard-working citizens. Transfers should not become entitlements. Our Minister of Finance should not fancy himself as Father Christmas, dispensing largesse at the taxpayer’s expense.

I would like to believe that transition measures targeting specific cohorts (now that targeting seems to be gaining respectability given the sharply-limited financial affordability) can be fashioned in a time-limited manner to contain the fallout for the public treasury and the work culture.

For a recent example where electoral promise may be skewing public policy in the wrong direction, look at the lowering of educational achievement standards for remedial classes: No, Minister of Education Gungapersad, you do not strike a blow for educational excellence, — surely the foundation for excellence in other activities to come after school – by lowering standards. A time-limited solution would have left us with an ongoing issue for the current cohort, whose progress in the workforce could have been closely monitored, with targeted remedial programs introduced to help them catch up gradually.

And, yes, the 97% failure rate is itself a major scandal to be put to the credit of the outgoing government. It should be fully investigated and the culprits brought to heel. That is part of the solution too, unless we want to close our eyes because we are still in the campaign mode:nou dimoune ça! What a waste of resources paid for by the public!

I think the four-party alliance provides a solid platform to undertake the kind of deep reform and restructuring the country clearly needs at this juncture. If they do not address themselves to that, it’ll be a missed opportunity that we’ll live to regret. And our children will pay a heavier price still as we would be leaving them a legacy which we could hardly be proud of. So, Navin, Paul, and Team, put your shoulder to the wheel; pull us out of this rut; and get on with the job! But do not expect instant results… structural reforms take time to work through and yield results. We must have the patience to stay the course.

* There must surely be political reasons, more than anything else, why the Prime Minister chose to keep the finance portfolio under his watch. Is that good for the economy?

We have little doubt about the Prime Minister’s determination to deliver on the job. It’s the same determination that got him to work so patiently on cobbling together the alliance which he now leads.

The nature of the task confronting a Minister of Finance — one worthy of the title, which we haven’t had for long — at this particular juncture is such that an ordinary line Minister, assuming he were inclined to embark on the path of reform in the first place, would have trampled on so many toes in Cabinet, in Parliament, and elsewhere in the country that they would quickly have been shown the exit door. With the Prime Minister helming it, we have some firmer expectation that the job will actually get done.

We can thus confidently look forward to the day when we regain our lost international respectability and claw back, step by step, the reputation which we had previously enjoyed as a smart big little country with the bad habit of punching above its weight.

Mauritius Times ePaper Friday 27 December 2024