The priorities for the new Finance Minister

The 2016/17 budget exercise kicks off! And at the helm of the country’s finances is none other than the Prime Minister Sir Anerood Jugnauth himself. Following a recent Cabinet mini-reshuffle, the latter will now have the task of presenting the next Budget. His priorities remain the same as those of the previous years: economic development, job creation and poverty eradication. The next Budget will, unless another last minute change intervenes, be presented by Sir Anerood Jugnauth himself. After a minor Cabinet reshuffle on Monday afternoon, the Prime Minister now holds the finance portfolio, a position he has held in the past when he was leading a previous government and the then Finance Minister, who happened to be the same Vishnu Lutchmeenaraidoo, stepped down. After over a year at the helm of the country’s economic agenda, Vishnu Lutchmeenaraidoo will now head the Ministry of Foreign Affairs, International Trade and Regional Cooperation. As is the custom every year, all ministries and government departments are required to submit their projects no later than April 7th to be considered for Budget allocations. Proposals should cover the next three financial years (2016/17, 2017/18 and 2018/19). Furthermore, the Finance Ministry has also invited civil society at large to submit proposals. According to the Ministry of Finance, the 2016/17 Budget will be prepared in a difficult economic environment, characterised by a general slowdown, especially in the BRICS countries (Brazil, Russia, India, China and South Africa). The Prime Minister said on radio on Monday that his priorities are economic development, job creation and the fight against poverty. Note that the former Finance Minister, Vishnu Lutchmeenaraidoo, had previously announced that the next Budget will focus on research and development. Last year, the main theme was SMEs and access to finance. Goals The next Budget exercise will reflect the ‘Vision 2030’ and the ambition of making Mauritius join the league of high-income countries. The aim is also to achieve a growth rate of at least 5% in the near future. This rate is closer to the historical average of the country’s economic growth rate. To succeed, the Budget has to come up with innovative economic measures. Already, the authorities are increasingly talking of greater diversification of the economy, with much emphasis on emerging sectors, such as the ocean economy, the financial services sector, an open sky policy and the real estate sector with smart cities. The government wants to encourage more private investment in order to stimulate job creation, increase productivity and boost competitiveness, incorporate digital technology into our way of doing business, and, most importantly, strengthen our economic resilience. Challenges The enormous challenges facing us are manifold. The level of public debt is increasing dangerously, having already crossed the Rs 259 billion mark at the end of December 2015, (approximately 63.8% of Gross Domestic Product). The government must bring it to a level in line with the Public Debt Management Act. A difficult challenge, especially since the country must also borrow more to invest in public infrastructure and to fight poverty. Also, the country has taken engagements to bring its debt level to around 50% of GDP. It is quite debatable whether this figure could be anywhere within reach in 2018, which was a previously agreed deadline. Limited manoeuvre It’s a tune to which we are now accustomed. This year again, in a circular to government departments, the Ministry of Finance wrote that “the leeway in the budget is very limited.” To support this thesis, the letter states that the implementation of the PRB report of 2016 will weigh heavily on government finances. Because of these constraints, the Ministry of Finance has already worked the maximum ceilings for spending. As its wage bill increases, the government has less room to manoeuvre in terms of discretionary spending without having recourse to borrowing. Strategies All ministries and departments are requested to prepare their proposals in the light of Vision 2030 made by the Prime Minister last August and the 2016-2019 economic strategy itself low on the 2015-2019 government program. Prior to the general elections in December 2014, the leader of the Lepep Alliance, Sir Anerood Jugnauth, promised that he will usher in another ‘economic miracle’ once in power. It was one of the electoral promises which led to his side edging over the outgoing government. When Sir Anerood Jugnauth was Prime Minister during the years 1982 to 1995, the country went through a phase of rapid industrialisation. The rampant unemployment, which he inherited at the start of his primeministership, was mopped up within a few years, as Mauritius became a manufacturing powerhouse, mostly in textiles. Higher standards of living, quasi full-employment, and higher household earnings were hallmarks of those years which would later be called an “economic miracle” by the international community. [[{"type":"media","view_mode":"media_large","fid":"13349","attributes":{"class":"media-image wp-image-22013 alignleft","typeof":"foaf:Image","style":"","width":"211","height":"192","alt":"Ashwin-Baijnath"}}]]Ashwin Baijnath: “Old school, yes, but...” Ashwin Baijnath, an entrepreneur in the ICT sector, says he positively welcomes the change at the Ministry of Finance. “We must always appoint a Minister according to his competence. I think Sir Anerood Jugnauth should have kept the portfolio of finance right from the start! I am however convinced that something is wrong, otherwise what is the main reason for the reshuffle? If anyone has sinned, he should be punished, not rewarded with another ministry!” he said. And what does he think of the economic recovery under SAJ as the new captain? “SAJ is from an old school, but who has proven himself and has a track record and I have no doubt that he will lead us safely. Indeed, I had serious doubts about his predecessor. But we must also realise that Sir Anerood Jugnauth must appeal to young professionals with fresh ideas if he wants to succeed. Smart people and young ideas. And the country has many,” he said. “The old school is important, but we also need a good dose of new practices, especially as young people today think differently.”