Blog: Budget 2013 - A non-Event

Budget 2013 which will be presented this evening seems to be a non-event. The high expectations of the yesteryears are gone. There used to be a time when everybody was rushing back home to watch the minister of Finance reading is speech and announcing measures to improve the life of the population.

Taxes both for individual and corporate have been gradually reduced to a basic 15% today. Government used to grant more than what was demanded by the corporate sector. Incentives were given to small entrepreneurs. Special funds were created to face difficult times. Stimulus packages were given to the corporate sector to allow it to create and retain jobs.

This year I have a feeling that it will be a routine exercise. Still Xavier-Luc Duval will not be able to ignore the holding of the forthcoming village and municipal elections on 2nd and 9th December respectively. Without being able to afford an electoral budget, he will have to put in a good balancing act. The strings are still in the hands of the government.

By this moment, when you are holding this paper, all the decisions about budgetary measures both capital and recurrent have already been taken. They must have already been submitted in all secrecy to the government printer for printing and binding the minimum number of copies required for the exercise. Only the budget’s speech which must have been finalized as usual will be printed at the last moment at the ministry itself.

By now, only two persons know about all the measures, the vice Prime Minister and  Minister of Finance and the Prime Minister. It is public knowledge that all measures in the budget are continuously discussed, approved by and finalized by the Prime Minister.

Government has already announced the most important measure of this budget. Provision will be made for the payment of more than Rs 4.6 billion for the implementation of PRB recommendations as from January next year.

During his last week visit to Rodrigues, the Prime Minister also announced an increase in subsidy in rice and flour for Rodriguans. This increase will allow Rodriguans to pay the same price as the one prevailing in Mauritius for these commodities. Rodriguans used to pay a higher price on account of cost of additional freight for goods sold in Rodrigues.

Government used to pay a Rodriguan cost of living allowance to those posted there. The Prime Minister has also announced an increase in the number in scholarships to the students in Rodrigues.

These are excellent measures in the consolidation of the Mauritian State and the development of Rodriguans as full fledged citizens of Mauritius. Mauritius gives massive grants to Rodrigues in order to ensure its development. Still Rodrigues suffers from an inferiority complex and a sense of injustice. It is said that at each visit of Navin Ramgoolam, Rodrigues makes a leap forward. If ever he decides to change his constituency, Rodrigues could be a safe one for him!

Just like the US, where the number one problem the newly elected President Obama has to face, is the debt problem, Xavier-Luc Duval will also have to tackle our debt problem. The debt per capita has increased to an alarming level. Everyone is over-burdened with debt.

The way forward is to increase productivity, increase our growth rate and create wealth. It is expected that stimulus packages will be provided to all sectors from small medium to big entrepreneurs to allow them to invest and create jobs and wealth.

In spite of Mauritius being 19th for ease of doing business, our bureaucracy remains inefficient. Meet and ask anybody who wants to start a business - small or big. The number of hurdles and stops he has to cross before he opens shop is discouraging. Mauritius is an over-regulated country. Our regulations bind our feet and hands and ask us to run the Olympic race. How could anybody win?

The policy of government is to encourage small entrepreneurs. Access to finance at reasonable rates is only on paper. Compliance laws being the same for small and big ones have killed many small enterprises. This fact is known to our policy makers. The budget provides an excellent opportunity to tackle this issue.

I am aware that government has slashed and sliced the budget of all government departments and parastatal bodies to even an unsustainable level. Without saying it, austerity is on. Tightening the belt, eliminating waste is good and healthy. But austerity also hurts the common man and is not good for growth, and we need growth of at least 6% to usher Mauritius on the path of a high income country. Not nice to be in the shoes of the Minister of Finance today.

The test for the budget will be whether it will be able to change the mood of pessimism and depression which are creeping in our system. There is need to create the feel good factor and the confidence that Mauritius can win.

Gone are the days of ‘no tax’ budget. I am sure government will maintain the Welfare State of free education, free health service, universal non-contributory pension to the elderly, free transport to students and the elderly. In these difficult times, all those who have must make an extra effort and contribute a little more. The corporate tax should be increased. I believe they can afford to pay a little more from the indecent profits they publish and made on the back of the consumer.

We should learn a lesson from the victory of Obama. One of the main factors which ensured his victory was that he was seen as somebody who cared for the poor and the middleclass. His opponent wanted to reduce tax of the corporate sector and do away with his welfare program. He was rejected.

Our government is close to the Democratic Party. Obama’s re-election should serve us as a lesson for the December and 2015 elections. Even this non-event budget can put the country on the path of growth.