For the former Minister of Finance, Rama Sithanen, an economic crisis is looming on the horizon for Mauritius. He argues that many economists like him would agree that the country's current economic model would not be sustainable in the long term. He was the guest of Nawaz Noorbux during the program Au Cœur de l'Info, on Radio Plus, yesterday.
To support his statements, Rama Sithanen takes the example of the payment of pensions to those over 60. “Today there are about 260,000 and in ten years there will be 170,000 more, making a total of 430,000. When you take that number and divide by the number of workers, the number will be very high. It’s clear that this will not be sustainable,” he makes clear.
Also, Rama Sithanen cites the projections of the International Monetary Fund (IMF) which forecasts growth of around 3.5% for Mauritius from 2025. “With such a rate, it will be impossible for this to be sustainable,” adds -he. And for him, there will not be 36 solutions. “We will have to tax people. According to my calculations, the CSG could reach 20-25% (editor’s note, the tax rate on salaries),” he estimates. An alternative would be, according to him, to focus a little on growth, review spending, taxes, debt and sell some state jewels.
Crisis on the horizon
But with current economic policy, for Rama Sithanen, a crisis is looming on the horizon. He says he is mainly wondering about these three questions: how much time remains before the crisis occurs? How intense will the crisis be? And what shock therapy will the International Monetary Fund administer to Mauritius at that time? “I don't think we're going to suffer the same fate as Venezuela or Zimbabwe. I won't exaggerate. But there are many countries that have done what we are doing here in Mauritius. Ghana was the 'darling' of the international community eight years ago, but today the country is on its knees. Bangladesh and Sri Lanka are in trouble,” he says.
Rama Sithanen indicates that through these remarks, he does not wish to frighten the population. “But I have to tell her that there are difficulties awaiting her and that this will continue,” he says. The former finance minister under the Labor Party regime says he hopes those who caused this crisis will no longer be in power. “Because they will have to make very difficult decisions,” he predicts.
Budget
Commenting on the measures announced during the 2024-2025 Budget, Rama Sithanen speaks of “vintage Padayachy”. The economist concedes that there are “very good measures”, but that the Minister of Finance made a “very political and electoralist” choice. “I have no objection to that, but he did it excessively. We all know that during the last year [d’un mandat], the tendency is to lean more towards social measures than economic ones. 'La pena ekilib, linn baskil tou ver sosial',” he opines.
Price to pay
For Rama Sithanen, the population will have a price to pay for the “social largesse” of Renganaden Padayachy because, according to him, there is nothing planned for the long term. “The population is already paying the price with the absence of foreign currency on the market. There is poor monetary and fiscal policy and we have entered into an import-driven consumption model, rupee devaluation and inflation. 'Fini koumans peye ek pou kontinie peye',” he maintains, conceding that the lack of foreign currency would also be due to retention by companies or individuals.
Positive measures
Rama Sithanen nevertheless recognizes four flagship measures of the MSM government, namely the introduction and increase of the minimum wage, the guaranteed minimum income of Rs 20,000, the CSG Income Support for those receiving up to Rs 50,000 and the old age pension. “These are four strong social measures on which they will campaign. But Padayachy somewhat caught himself in his own trap, because he raised the stakes so much that many people were left wanting more,” he believes.
Funding
Rama Sithanen suggests that the 2024-2025 Budget will be financed by taxes, whose revenues will increase by around Rs 33 billion, from Rs 176 billion to Rs 206 billion. “It will collect more taxes with inflation and depreciation of the rupee. He will get Rs 13 billion from the CSG tax. Not to mention that he has just introduced a new tax on companies in relation to the environment and through which he can hope to recover some Rs 5 billion,” he says. The sale of state assets as well as the “residuals” remaining in certain government funds are other sources of financing.
Imported inflation
For the former Minister of Finance, it is false to say that Mauritius would be powerless in the face of imported inflation which drives up the prices of consumer products. He concedes that Mauritius has not been spared from inflation, to a certain extent, after Covid-19, the Russo-Ukrainian war and geopolitical tensions which impacted the supply chain, driving up the cost of freight. . But, according to him, it is the government's “expansionist policy” which has exacerbated this phenomenon. “I would say it's 30% due to external factors but 70% due to monetary and fiscal policy,” he says.
Rs 1 trillion Economy
Rama Sithanen suggests that there is nothing extraordinary about achieving an economy of Rs 1,000 billion, the objective set by the government in the next five years. “We can reach this figure next year, if we get inflation to 50%! » he quips. For the economist, the most important elements to consider once this figure is reached are: what is the contribution of real growth to the economy and what is the effect of inflation and the depreciation of the rupee on these Rs 1 trillion.
Climate change
The Corporate Climate Responsibility Levy of 2% introduced in the 2024-2025 Budget and taxable on the profits of all companies with a turnover of more than Rs 50 million is considered “a disguised additional tax” by Rama Sithanen. According to him, there already exists a special fund to which tourists, in particular, contribute. If he resolves to accept that eligible local companies have little choice but to contribute, he hopes that this will not impact the clients of Management Companies. For Rama Sithanen, it would have been better to emphasize the polluter pays principle, invest in systems combining energy efficiency and carbon neutrality and also promote low-impact, high-value tourism, among others.
Policy
Addressing a political aspect, Rama Sithanen is of the opinion that a three-way, or even four-way, fight during the next general elections will tend to favor the MSM. He predicts that the regime in power will not fail to show its four trump cards (editor's note: the four positive measures mentioned above) during the campaign. The former finance minister, however, warns against revulsion. “People are tired of always seeing the same faces,” he says. While he thinks the “4 to 14” phenomenon could persist, he wonders if it will be enough to prevent a wave of change. “Time will tell!” », he concludes.
