The Magic of Percentages
Quite cleverly, the Minister of Finance has, in his two hour-long speech, managed to mention by name some 20-plus localities that will benefit from an improved drainage system. This will not have fallen on the deaf ears of the persons concerned. Nor will municipal ratepayers forget that their family home will be exempted in future. Likewise, throughout the various strata of the population, there must have been smiles and cheers as the Minister unveiled all the allowances and subsidies he could afford to offer to the population at large, but with the exception of cigarette smokers.
Quite cleverly again, the Minister had, very early in his speech, stressed the fact that the public debt was to fall from 96.1 % of GDP at the end of June 2021 to 87.4% at the end of this month. An estimate of 78% of GDP is expected at the end of June 2023. This is not surprising: GDP is increasing at a relatively high rate as the economy gets going again after the closures due to the pandemic. So far so good, but one must guard against the magic of percentages, the size of the public debt must be kept in mind, since in the final analysis, its magnitude will have a bearing on debt service and, to the extent of its denomination in foreign currency, on the balance of payments.
In other words, while at first sight, this budget gives an overall impression of widespread generosity easily achieved, it bears possible consequences for the future, should the local economy have to continue facing up to the shocks encountered since 2020 and which are not abating, particularly due to the war in Ukraine and Russia.
The Minister has insisted that, overall, the totality of his budget proposals constitute an investment and not a cost. Let us hope that this investment will indeed yield the fruits envisioned by the Minister, failing which we run the risks of having a finger pointed at us by the upcoming taxpayers when they are faced with heavy public debt bills.
Still in the mode of investments, let us hope that the emphasis placed on agriculture (crops, livestock and fishing) will yield substantial results and that the incentives for a higher birth rate will bear fruits. In fine, this country will progress, only through the efforts of its economically active population.
More than ever, sound and long-term prosperity can only be achieved through the deployment of one’s own capabilities as an individual and as a nation.
Acknowledgements: BDO (Mauritius) Team is grateful to Mr. Pierre Dinan, former Partner of BDO/DCDM, for his editorial and his valued contribution.