Dan Maraye: “Most of the economic indicators have deteriorated”

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Dan Maraye, economist and former governor of the Bank of Mauritius, about whether the budget has met his expectations.

Dan Maraye, economist and former governor of the Bank of Mauritius, about whether the budget has met his expectations.

A week after the budget, Weekly speaks to Dan Maraye, economist and former governor of the Bank of Mauritius, about whether the budget has met his expectations. He discusses the lack of “economy in the budget”, the danger of selling the Mauritian passport, and the economic performance of the government since it came to power

In an interview in week-end just before the budget, you had said that you were not expecting anything from the budget. Were you disappointed or was the budget exactly what you had expected?
I am glad to say I was wrong because I think that this budget has a lot of social measures. Certainly, the government did not address the imbalance in the macro economy. However, there is a lot for the less fortunate and I’m glad about that. It’s true to say that there is not a lot of economy in the budget, though.

So if ‘there is not a lot of economy in the budget’, where is the money going to come from?
Excellent question! I personally think that the fact that the minister has introduced a rate of tax of 10% which will help the less fortunate, the middle-income group will have more disposable income. This will certainly go into consumption. 

How is that going to help since a large part of what we consume is imported?
You are right but, I think the government is going to reap a higher level of VAT on these goods, so that could be one of the sources. There is also this new thing that the government has introduced about controlling expenditure in different departments of government – and I hope also in parastatal organisations. The fact that the report of the director of audit will be taken into account and different departments in their annual report will have to explain these weaknesses and at the same time, say what they have done to ensure that the same weaknesses do not repeat themselves. 

You don’t believe that something like that can realistically be implemented, do you?
It’s all a question of discipline. You are right that, in the past, an important percentage of measures that had been announced in the budget have never been implemented. That’s true, that’s a fact. However, I wouldn’t like to pre-judge that until next year. And I have to say that the director of audit has been doing a very good job for a very long time in this country, and it is unfortunate that corrective measures have not been taken for so many years. At least I think it’s one step forward, and if discipline is installed and people are made accountable, that will be in the interest of everybody. 

Going back to consumption. Since most of the things that we consume are actually imported, the more we consume the more, we will import. What about the trade deficit?
Yes, precisely. It’s a double-edged sword. Certainly it will have a negative impact on our balance of payments, balance of imports and exports, and it will also have a negative impact on inflation because we will have imported inflation. 

So, the impression that one gets from this budget is that there is a lot of giving – or at least the intention to give – but then, where is the money going to come from, nobody seems to care. Is that also what you think?
No, I won’t say that. I don’t know if nobody cares. 

But where are the measures to create wealth to be able to give part of it? To share the cake, you first have to bake it, don’t you?
Precisely. We have to start somewhere. It’s true that there are not really strong measures to boost the manufacturing sector, that’s true and this will certainly, again, affect our balance of trade. It will have an impact. Perhaps there could have been more incentives to local manufacturers that would have helped certainly the manufacturing sector, which badly needs an important boost to ensure that our trade deficit starts correcting itself. 

You still haven’t told me where the money is going to come from.
You’re right. I’m not in a position to say where the money will come from. I hope that those who prepared the budget have been responsible enough to ensure that they know exactly where the money is going to come from. 

If they know, why didn’t they tell us in the budget? The only thing we know so far is that the money is going to come from selling Mauritian passports. Does that measure scare you?
I am personally against this selling of Mauritian passports. The idea scares me, of course, and it scares most Mauritians. We don’t want any more Sobrinhos and I don’t think that this is going to bring that much money. As we all know, Alvaro Sobrinho has really damaged our reputation worldwide, and we don’t want to see that again. I hope, for the good of the country, that regulators do it property, and not look at investors in the eye and say they’ve got clean money. I hope that they have learnt a lesson and that politicians will not interfere in the work of the regulators.

When you say that this is what you hope, do you really believe it will happen?
It depends of the quality of the people at the head of the institutions. If these people have a certain maturity and wisdom that is needed to occupy this post and keep a certain independence, away from politics, it can happen. But the government has created a very bad precedent, and a very bad trend. If they carry on appointing family members left, right and centre, the country is going to the dogs. The past three years haven’t shown any wisdom and I’m hoping that people get wiser for the sake of my country.

People are also worried about our public debt which economists say is being hidden in special purpose vehicles (SPVs). Would you agree with Eric Ng that our real debt is hovering around 70% if we remove these SPVs?
Yes, Eric Ng is right in his analysis. The problem is that once an individual takes a loan of one million rupees, for example, automatically that person has a liability of one million. What the government has done is transfer loans to certain SPVs and only the amount that is payable within the year has been accounted for as a liability, which I personally believe is not correct and is certainly misleading. 

Is our level of debt worrying?
I think that we cannot carry on living beyond our means, although we certainly need to borrow money for capital expenditure. When we start borrowing for recurrent expenditure, that is very dangerous. 

If you look at all the economic indicators in all the sectors, barring construction which is picking up and tourism, all other indicators are much lower than they were three years ago. What do you think about that? 
You’re right. These are causes for worry. That is why I said earlier that even though there are some good things in the budget, they have not looked at the macro economy which we have to give serious thought to. The trend is not in favour of this government. 

What do you mean?
Their performance since 2015 to date is not in their favour. Most of the economic indicators have deteriorated. It’s up to them now to prove their worth, since they have one more year to go.

First, we’ve had three ministers of finance over a short period of time. Some organisations have had three chief executives in that short period. This has caused a lot of instability. Secondly, some things don’t look serious. If I were to take, for example, the price of petrol. They increased it one month prior to the budget and then they decreased it in the budget. This is not serious! it’s erratic. You can’t increase the price of petrol by 10 per cent and then decrease it by about five per cent. From the very beginning, they should have increased it by five per cent, since this is a matter for the State Trading Corporation (STC) specialists to rule on, not the minister of finance in the budget. It appears that it was done on purpose with a view to decreasing it so that people say that it’s a good budget as the price of petrol has gone down, when in fact it hasn’t.

The government is convinced that it’s doing better than the previous one. Is it?
I don’t think that this government has done any better than the previous one and I’m not saying that the former government did well either. What I’m saying is that we don’t have a full-time minister of finance and the economy of the country over the past three years has been managed in a very amateurish way. But there’s a will to do better.

If the will is there, what is lacking? Competence?
We have loads of competent people in this country. The issue is that family members and people close to the parties in power have been appointed and most of them are not up to standard. This has discouraged good people in this country, and many of them are thinking of leaving. It’s dangerous given our issue of rate of growth of population.

Do you share the view that there is a lot of labous dou measures in this budget so that Pravind Jugnauth comes back to power?
I believe Mauritians are intelligent. I don’t think any politician can fool the Mauritian people with mere labous dou measures. Voters look at the overall performance, the level of corruption, how contracts are granted, how appointments are made, is the Equal Opportunities Commission functioning properly, the quality of education, the job prospects, and so on. If you look at all these, we certainly have issues. So, even if you give voters a pound of gold, you won’t be able to fool them to vote for you. I don’t think giving away freebies in any budget will influence the majority of people who go to the polls. You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time.

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