An IMF mission team, headed by Ms Cemile Sancak, conducted through virtual discussions and examinations the Mauritius 2021 Article IV Consultations over the period April 19th to May 7th. These are usually somewhat unremarkable affairs leading to dreary prose couched in the polite diplo-speak of nuances, ending up with some suggested avenues for consolidating all the good work being accomplished by local authorities.
“The Mauritius Investment Corporation has of course, as we know, been the subject of intense criticism since its inception locally but it is somehow reassuring that the IMF too concurs with the condemnation of the unhealthy role of the BoM and its wholly owned subsidiary as a grand financier of projects from distressed conglomerates. What is even more irritating is the culture of secrecy that shrouds over its disbursements: how much, to whom and under what terms should have been a self-evident imperative where our accumulated savings and reserves are being handed out at such levels…”
After almost eighteen months of the pandemic, these were probably awaited with some trepidation by government and central bank circles, and with interest by the independent analysts and the economically literate audience. After all, the two years since the last exercise have seen the Covid-19 pandemic tear through much of the economy and our lives. Finance and government generally may have been anxious about the prognosis of the IMF on the handling of the economy and the priorities of government during those two years. And, for once, their trepidation was not misplaced.
Although the team’s Staff Report is not yet available, Ms Sancak issued a concluding statement from Washington on May 7th highlighting the IMF view on strategic issues and priorities concerning the country. After the traditional words of praise for areas where she felt government could be commended (handling the pandemic public health aspects and the ensuing financial support schemes in particular) the lady cut to the chase.
Her statement revealed a series of sharp observations and somewhat tersely worded recommendations, all of which indicates that the 18-day virtual audit must have been most awkward for government folks in the higher spheres. The sobering recommendations will be pored over by her specialist audience and the knowledgeable public though we will mention some key ones here as they are rather unusual for their bluntness.
The IMF lady team-leader minces no words in admonishing the authorities to “prioritize and target expenditures to set the stage for resilient growth”. This is followed by a doubling down with a rather stern recommendation to “prioritize programs that are consistent with medium-term development needs and broader social and environmental goals”. This sounds like a severe blowback for a variety of massively costly public sector investments, many of them barely transparent or marginally relevant to those development needs.
One can infer a gruelling grilling over any number of wasteful projects, ranging from the erratic Safe City CCTV cameras, the stadium dubbed as a white elephant at Côte d’Or, the Rs 400 million for a few minutes of Liverpool coverage when tourism remains in the doldrums, the crony contracts during the 2020 pandemic, the P&B unresolved farce or even, heaven forbid, the tramway and its limited corridor for Port-Louis commuters! Were we flies on the computer walls…
Equally incisive it seems, over the long days of burrowing, were the questions, observations and recommendations regarding public debt levels and their management post-pandemic. Here again the IMF team must have been flustered enough to rebuke our best technocrats robustly on the issue and the absence of credit-worthy plans to stabilize a debt level that now exceeds 90% of GDP and is running headlong to the 100% mark.
This was no harsh criticism emanating from Opposition or independent economists. It came from an institution that had been rather muted while the public debt was slowly ballooning from 2015 to 2019. Neither had it been forceful in condemning the variety of accounting sleight-of-hand or colourable devices that ended up misrepresenting real public debt and obligation levels over that same period. So, the tone and the glare of the spotlight might have come as a shock to the same government establishment that had been so liberal in their expenditures through monies we did not have and were borrowed.
The Bank of Mauritius credibility
Our high-flying team may also have blushed with the IMF team leader recommendation to “further improve the BoM credibility”. One cannot help wondering what impression the Bank’s Governor and his top echelons left with the IMF team. But what will undoubtedly catch the headlines is the very curt recommendation that the BoM “should relinquish ownership of the Mauritius Investment Corporation (MIC)”. One can almost sense the unwritten “immediately”! Experienced former Ministers and cadres will know better, but one feels that very rarely has such a major Finance initiative attracted such irate words in a world of soft carpets and hushed tones!
The MIC has of course, as we know, been the subject of intense criticism since its inception locally but it is somehow reassuring that the IMF too concurs with the condemnation of the unhealthy role of the BoM and its wholly owned subsidiary as a grand financier of projects from distressed conglomerates. What is even more irritating is the culture of secrecy that shrouds over its disbursements: how much, to whom and under what terms should have been a self-evident imperative where our accumulated savings and reserves are being handed out at such levels.
Both the BoM and Finance received more flak with the IMF showing manifest unhappiness at the one-off projected Rs 80 billion transfer of our reserves to the Consolidated Fund of government. It issues a stern warning to “preempt further exceptional transfers to the government, in line with international best practices.” We recall that these exceptional transfers concerned Rs 160 billion of accumulated savings at the central bank, half for the Minister’s budgetary support, half for financing conglomerates, with little or no transparency on either front.
A rare scolding
Ms Sancak’s brief statement does not delve lengthily on avenues of structural reform or sustainable growth areas the IMF might be more fully examining in their upcoming Staff Report. It neither mentions the repercussions of such depleted BoM reserves for our currency and inflation, nor on the restrictive hurdles placed on the Audit Office in their constitutional monitoring duties, still less on the wastage the Audit Report depicts or on other billions Mauritians are still paying for a generally acknowledged mishandling of the BAI/Bramer affair. She did not need to: wrapped in perfunctory niceties, the words and terms indicated a rare scolding from the august institution that, in our dire economic straits, with little sources of outside assistance, our finance technocrats had to stomach with fortitude.
In a situation where avenues of democratic expression are being overtly restricted, where the municipal elections due in June are about to be shelved, where the National Assembly looks skewed, questions severely restricted and leading Opposition members expelled, where it is proposed to curtail the remaining internet and social networks free space, Opposition forces and a growing fraction of the population may feel, sadly, that only overseas institutions can force some degree of course correction to avoid a fulsome banana republic image.
As usual these days, the IMF team-leader ends by commending and encouraging authorities to pursue coordinated efforts to exit at the earliest the IMF/FATF grey list and the ensuing blacklists of both the European Union and the UK. Government is shortly due to defend its case at the virtual FATF plenary sometime soon, followed possibly by an onsite inspection and audit team.
Our layman understanding is that there are some outstanding issues with the capacity of our regulatory and investigative authorities to investigate financial scams, fraud, corruption and drug-related money-laundering, much of it through “hawala” money transfers, gaming and gambling. It is probably true that many such activities have grown in sophistication and scope, but government’s team defending our interests may have to demonstrate factual evidence of investigations leading to trials and convictions, particularly in high-profile cases.
We can only wish them well, as the IMF does not seem in the mood for massaging locally bruised egos which may indicate that probing questions about demonstrable tangible results of our investigative institutions may not be in short supply.
* Published in print edition on 11 May 2021
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