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The socialist accent deliberately favored by the Minister of Finance in the 2024-25 Budget tends to reduce inequalities. This philosophy, which should have a positive influence on those at the bottom of the ladder, will however weigh on state spending.

The Minister of Finance defends his 2024-25 Budget which, according to him, is in line with the government's philosophy. Renganaden Padayachy emphasizes that this government has continued to make the reduction of inequalities a daily struggle. “Wherever inequalities persist, we must fight them with strength, conviction and redistribution,” he said.

Several measures have been announced to protect the most vulnerable in society. These include, among others, the Guaranteed Minimum Income of Rs 20,000, the increase in pension to Rs 14,000 and allowances for those at the bottom of the scale.

Economist Ibrahim Malleck notes that Minister Padayachy's previous budgets have focused on social protection and reducing socio-economic inequalities. For him, in an election year, it is obvious that this trend will be reinforced. The Mauritian economic model is said to be based on a solid welfare state which has played a positive role in growth strategies. “Any reduction in socio-economic inequalities must be welcomed, and a growing economy must give itself the capacity to lift up those at the bottom of the ladder. As such, the government, in line with its previous budgets, had no choice but to propose the current measures,” argues Ibrahim Malleck.

The increase in the guaranteed minimum income as well as the adjustments to universal pension benefits are seen by economist Bhavish Jugurnath as a strong signal to people on the lowest incomes. On the side of Maurice Stratégie, we anticipate that the social measures announced, in particular the increase in basic pensions, the CSG for children, the education allowance, the maternity allowance and the CSG on income, should contribute 1 percentage point to the country's Gross Domestic Product (GDP).

Measures at a high price

With the 2024-25 Budget, government recurrent expenditure is expected to increase by 13.9%, from Rs 184.4 billion in 2023/24 to Rs 210.1 billion in 2024/25. The main reason for this increase, we understand at Maurice Stratégie, is the increase in social benefits (Rs 14.1 billion), employee remuneration (Rs 3.1 billion) and subsidies (Rs 2 billion). . As for the substantial growth in social security expenditure, it is expected to jump by 163.1% to around Rs 77.6 billion in 2024/25, compared to Rs 29.5 billion in 2017/18.

The question of financing social measures is intended to be legitimate while the country's public debt last March was more than Rs 500 billion. The debt, both internal and external, remains high compared to the Rs 321 billion recorded in 2019. In 2025, it could reach Rs 567 billion.

Bhavish Jugurnath argues that all these “generous” measures are accompanied by a single new tax, called the Corporate Climate Responsibility Levy, amounting to 2% of corporate profits. “While this may be affordable in the short term, the growing burden on the welfare state is a big concern,” he warns.

However, the growth of inflation also deserves consideration with the introduction of social measures. Bhavish Jugurnath is of the view that the Budget is likely to revive growth to an acceptable degree, “provided that the actual implementation of the measures announced follows the intentions.” This is where the real test will lie.”

The socialist philosophy and in particular the current pension system is also a subject of questioning regarding its viability. Ibrahim Malleck underlines that several voices have been raised among professionals on the viability of the CSG within the framework of the Basic Retirement Pension (BRP) model. “It needs to be addressed quickly,” he said.

Productivity

Several analysts have sounded the alarm about the inflationary trend, the constant depreciation of the rupee and the aging population. So many challenges which, according to some, are putting pressure on Mauritius and which would lead to difficulties in the medium term without structural adjustments.

Ibrahim Malleck also deplores the fact that the emphasis has not been placed on increasing productivity. This could force a review of the welfare state. “We need to change our mindset and ensure that our production and investment capacities continue to enable the functioning of a viable welfare state,” recommends the economist. Nearly 150,000 people are expected to reach retirement age by 2030, representing more than 26% of the population.

Furthermore, the new threshold set for the guaranteed minimum income should influence businesses. No employee will receive a salary below Rs 20,000. Should we expect a boost in productivity? Areff Salauroo, president of the Association of Human Resource Professionals of Mauritius, explains that the revision of the guaranteed minimum wage will push all former employees upwards. Each company, he says, will review the relativity of salaries. “Money is not a motivator. At best, it is a demotivator. What does this theory mean? When the salary aligns with the effort made, it is motivation. On the other hand, some employees might feel that their efforts are not fairly rewarded,” he explains.

Areff Salauroo says he expects a boost in productivity. For good reason, the employee, adds the president of the association, considers that he is well paid today. “Those at the bottom will be more productive. We should also take into account the fact that the salary report will soon be available,” he argues.

However, any increase impacts businesses. Certainly, the ministry will compensate the difference compared to the salary revision. That said, Human Resources also calculates the reimbursement of local leaves or the end-of-year bonus, for example. “Social costs thus have an effect on the company,” concludes Areff Salauroo.

Some measures aimed at reducing inequality

  • The “Guaranteed Minimum Income” at Rs 20,000.
  • Increase in pensions to Rs 14,000 per month.
  • Increase in the minimum amount of monthly subsistence allowance to Rs 1,500 per month.
  • Rs 11 M will be provided to increase access of SRM beneficiaries to employment opportunities through upskilling and internships.
  • The provision of glasses for all SRM beneficiaries will be covered by the government.
  • Construction of 546 new social housing units
  • The increase in the CSG Child Allowance to Rs 2,500.
  • Introduction of the School Allowance of Rs 2,000 per month for all children aged 3 to 10 years.

Inequality

The position of Mauritius at the global level

poverty

More than two thirds of the world's population live in countries where inequality has increased. According to Bhavish Jugurnath, even in nations where there have been declines in inequality like Brazil, Argentina and Mexico, it is on the rise again. Regarding Mauritius, a World Bank report titled “Mauritius: Addressing Inequality through More Equitable Labor Markets” highlights that household income from work is the main driver of increasing income inequality in Mauritius. Between 2001 and 2015, the gap between the incomes of the poorest 10% and the richest 10% of households increased by 37%. “Although progress has been made towards greater equality and social inclusion, the social burden on future generations remains a great concern,” says Bhavish Jugurnath.

For his part, Ibrahim Malleck explains that Maurice has come a long way since 1968 and has tackled inequalities at different levels. However, he argues that there are always areas for improvement, namely restoring the purchasing power of low-income people, maintaining the comfort of retirees and better access and greater equality for women within the workforce. of the active population.
“Mauritius still lags behind in terms of gender inequality, particularly when it comes to economic and political participation. Mauritius' global ranking in the gender gap report is in the bottom half: 98th out of 146 countries. But overall, Mauritius has been able to maintain relatively low and constant rates of inequality,” he says.

In numbers

More than 7,000 families and 28,700 vulnerable Mauritians are supported under the Social Register (SRM) by the government to escape social and economic exclusion.

Research on inequality conducted by Maurice Stratégie in August 2023

  • The Gini coefficient was estimated at 0.304 in 2022, compared to a Gini index estimated at 0.392 in 2017.
  • The share of cumulative income held by the richest 10% relative to the poorest 10% decreased from 15.4 in 2017 to 7.8 in 2022, and the share held by the richest 20% relative to poorest fell from 8.5 in 2017 to 4.9 in 2022.

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