Budget Synopsis 2015 - 2016

The budget presented by Honourable Vishnu Lutchmeenaraidoo Minister of Finance and Economic Development on March 23, 2015, aims to translate the vision of the new government into reality by banking on faster growth rate to achieve the twinned objectives of escaping the ‘middle income economy trap’ syndrome and of achieving the much trumpeted ‘second growth miracle’ while espousing greater social justice in the process. A major crux of this initiative was to focus on quality of growth through various strata of social measures designed to foster greater inclusiveness and to create new opportunities for more enhanced and sustainable potential growth rate. In this realm, a smorgasbord of bold initiatives ranging from the urge to address the country’s social problems, as epitomized by alarming surge in unemployment figures plaguing youth, to the creation of mega infrastructure projects, have set the dice rolling for attaining  these objectives.

Presented as a ‘no tax budget’ in a relatively less challenging external context than a few years ago, the budget reiterates the robust countercyclical policies philosophy designed to strengthen the country’s resilience. The recently observed decline in international oil prices, by easing inflationary pressures going forward, has opened up a margin for maneuver on the expenditure side by reengineering the composition of government spending and by enhancing the quality of spending, as well as by relying on the private sector investment initiatives to propel medium-term growth perspectives. We believe that the public debt will remain sustainable at 60 percent of GDP by year 2018  – as warranted by the IMF and the World Bank – and that the newly-hyped priorities for spending, as laid down in the 2015 budget,  do not present major risks to the country’s medium term fiscal perspectives.

We welcome measures designed to reduce public administration inefficiencies and bureaucracies. On the unemployment conundrum, the various opportunities given to the Small and Medium Enterprise (SME) sector through the creation of an SME bank and through various administrative and fiscal exonerations are good initiatives. True, SMEs are a major backbone to our domestic economy and a major contributor to our national wealth. Whether these initiatives will help absorb unemployment, remains to be seen. We believe that the unemployment problem currently plaguing youth in Mauritius is structurally different from that of the 1980s. Contemporary unemployed people in Mauritius are degree holders, have career aspirations, and prefer to stay under-employed than take on a job that does not correspond to their aspirations. We believe it would have been more useful for the government to undertake a meticulous diagnostics exercise identifying the structural mismatch problem and propose the creation of new sectors in the light of career aspirations of unemployed. Mega projects like the creation of cyber-cities, as announced in the budget, and the creation of new career-oriented faculties in tertiary education, are ostensibly welcomed and may partially hold the key to this question albeit there may be several degrees of freedom snatched off on the actual implementation risks without a blueprint on structural mismatches in Mauritius.

We fully support public infrastructure development initiatives, through greater private sector participation where necessary, at the Port and Airport, as well as measures designed to alleviate road congestion problems.  A number of initiatives were also announced to open access of Mauritian skies to foreign airlines to further buttress our tourism sector. However, we also believe that some of these initiatives (e.g., seafood hub, airport hub, petroleum hub, bunkering etc) were also announced in former budgets and came across an unfortunate number of bottlenecks such as lack of political drive, lobby pressures, lack of priorities in the priority pipeline etc. We believe that implementation risks should be addressed, going forward, to ensure that infrastructure measures announced in the budget do not represent simple rhetoric.

Measures designed to tackle poverty and widening social inequality, through a more participative approach from the private sector (through reform of CSR), as well as through wider initiatives like the Marshall plan, are also benign to help address social problems the country is currently facing.  As evidenced in many emerging nations, it would probably have been more useful for the government to tackle poverty and widening inequality problems through a radical government-based approach and leave infrastructural investments to private sector through innovative financing vehicles.