Budget Highlights 2020-2021

Budget Highlights 2020-2021

Against a backdrop of heightened uncertainty caused by the onset of the COVID-19 pandemic which has brought world economic activities to a screeching halt, the budget 2020-21 was much awaited among the business community and the population at large. The budget measures constituted the epilogue to a series of measures already announced during the 10-week lockdown period to grapple with the dire consequences of COVID-19 on our tradeable sectors such as tourism, manufacturing, small and medium enterprises, namely wage assistance support schemes for enterprises, and a slate of measures instigated by the Central Bank to prop up lending and to give a respite to borrowers who are mired in a liquidity crisis. We are navigating in uncharted territory.
 
The potential disruptions of the pandemic on the Mauritian economy remain unfathomable. The open orientation of our economy makes it heavily sensitive to the major economic upheavals taking place elsewhere. As an increasing number of enterprises in the tradeable sector teeter on the brink of bankruptcy, there is mounting concern that unemployment figures could reach a staggering 100,000 by end of this year. Thus, as preamble, the government ensured that there was no major change to the tax structure in a business environment characterized by grim revenue prospects even by pre-COVID-19 standards. This prompted the government to exceptionally seek financial support from the reserves of the Bank of Mauritius, following the enactment of the COVID-19 (Miscellaneous Provisions) Act in May 2020.
 
The Budget 2020-21 was presented in the midst of a gloomy economic outlook. In an attempt to reinvigorate the economy, the budgetary priorities will focus on safeguarding employment, supporting small businesses and entrepreneurs, revitalizing industries of strategic importance, encouraging autonomy in agriculture, developing the resilience of our healthcare sector, bridging the inequality gap, stimulating consumer demand and building investors’ confidence.
 
However, negative economic growth, protracted unemployment and snowballing public indebtedness have coalesced to leave little fiscal headroom for the Government. Against strong headwinds and limited resource generating abilities, the Minister of Finance had to judiciously juggle between economic and social measures.
 
He aimed for a neutral budget stance for 2020-21 with a planned expenditure of Rs. 162.9bn funded by revenue of equal magnitude. Major infrastructural spending as well as the creation of a data technology park have been earmarked to spur economic growth while bold measures have been unveiled to help support the most vulnerable sectors with appropriate redistribution packages.
 
To wrap up, the 2020-21 budget came at a time when the population was in need of a much-needed policy response. The effectiveness of the measures in strengthening the resilience of the economy and in offering an antidote to the socio-economic challenges ahead will depend upon how quickly the policies will be implemented. Drastic times call for drastic measures…