The Minister of Finance and Economic Development, Honourable Pravind Kumar Jugnauth, held a press conference on Friday, 15th July 2016.
The press conference focused on three points:
1. The state of the economy at 14 December 2014.
2. The country’s economic performance during FY 2015- 2016.
3. Challenges to be addressed.
The State of the Economy at December 2014
In his presentation, the Minister of Finance and Economic Development underscored that growth was 3.6% at December 14, 2014, slumping along a downward trend.
This, he said, indicate that the main sectors of the economy were in decline, for instance the construction sector (-8.5%) and the sugar (-3.5%). These indicators show that the economy had slowed down, and that any recovery would be possible only through long-term planning.
The Minister of Finance and Economic Development also stressed that total investment was 18.9%. Private sector investment had declined and stood at a rate of 14.1%, while public investment was 4.8%.
Regarding savings, the trend was also downward, set at a rate of 10.5% of Gross Domestic Product (GDP).
Unemployment, another important indicator, was already 7.8%, representing 44,800 unemployed. Young people (19,500) and women (25,400) were the most affected by the mismatch between market demand and available skills.
The Minister also added that the inflation rate had reached 3.2%, while the current account of the balance of payments showed a deficit equivalent to 5.6% of GDP.
With regard to foreign reserves, 6.2 months’ worth of imports was covered, while the budget deficit was 3.2% and public debt represented 53.6% of GDP.
Honourable Pravind Kumar Jugnauth pointed out that, at December 14, 2014, there prevailed a general carelessness that could have destabilized the financial sector and possibly jeopardized the economy.
For the Minister of Finance and Economic Development, many institutions were bedevilled by mismanagement and dogged by disastrous results.
Among these were the MPCB, with non-performing loans amounting to Rs 3.2 billion; DBM, with losses totalling Rs 538 million; Mauritius Post, cumulating losses of Rs 202 million; State casinos plagued by losses of Rs 628 million; and MBC, which was fraught with Rs1,2 billion worth of debt.
The Minister went on to comment about waste regarding national infrastructure projects, highlighting the following:
The Bagatelle Dam - The initial cost of the project, which was Rs 3.1 billion, doubled to reach Rs 6.2 billion, without counting additional forthcoming investments.
The Terre Rouge / Verdun Motorway- The initial cost of the project was set at Rs 2 billion, but its completion soared to Rs 4 billion. Subsequent damage due to the non-performing of required geotechnical tests will involve additional expenditure of some Rs 300 million for repair works.
The Ring Road - The initial cost which was Rs 1.3 billion was increased to Rs 1.7 billion. The collapse of part of the road will unavoidably entail additional expenses.
Honourable Pravind Kumar Jugnauth said that the costs of many other projects increased disproportionately. For example, the cost of biometric identity card project, which was estimated at Rs 400 million, ended up costing Rs 1.2 billion to government.
For the Minister of Finance and Economic Development, all these miscalculations and expenses have had a very negative effect on public debt and the country’s economy. The people of Mauritius and the new government have thus had to pay for a legacy of mismanagement and waste left behind by the previous government.
That poor administration also resulted in a deterioration at the social level which was, in turn, followed by some from of unrest.
The minister concluded that the new government has inherited a catastrophic situation marked by numerous problems from its predecessor.
2015 in Retrospect
Moving on to the second item, Honourable Pravind Kumar Jugnauth observed that social injustice had been prevalent for some time. Hence the decision taken by the new government to implement measures to redress the situation, especially through an increase in pensions for the elderly, the orphans, the widows and the handicapped.
The six-hundred rupee wage compensation was implemented with the same objective in mind.
These government initiatives have led to an increase in people’s purchasing power amounting to:
1. Rs 4.7 billion through increased pensions.
2. Rs 4 billion through wage compensation.
An amount of Rs 3 billion had also been earmarked for the wage increase recommended by the PRB, for 85,000 employees and 25,000 pensioners of the public service.
In terms of economic performance, the Minister of Finance and Economic Development explained that there are uncertainties looming on the international scene, where the rate of growth in several countries has been reviewed downwards.
Notwithstanding this, the growth rate of the Mauritian economy was 3% for 2014-2015 and it is expected to rise by 0.6% for FY 2015-2016.
At the sectoral level, the figures are as follows:
- The construction sector experienced a decrease of 4.9% in 2015, compared to a decrease of 8.5% in 2014.
- The tourism sector grew by 8.5% in 2015, compared to 6.1% in 2014
- The ICT sector grew by 7% in 2015, compared to 6.4% in 2014.
With regard to unemployment, a rate of 7.6% was recorded for the first quarter of 2016, a decrease from 8.7% during the corresponding period in 2015.
Inflation, which is at 1.3%, is falling, while the current account of the balance of payments improved in 2015, the deficit having decreased from 5.6% of GDP in 2014 to 4.8 % of GDP in 2015. Furthermore, the balance of payments also recorded a surplus of Rs 20 billion in 2015, the equivalent of 4.9% of GDP.
Regarding foreign reserves, 8.5 months’ worth of imports amounting to Rs 168 billion was covered in June 2016, compared to only 6.2 months (Rs 124 billion) in December 2014.
The Minister of Finance and Economic Development commented that the Mauritian economy has performed reasonably well, especially when one takes into account the highly sensitive and unprecedented BAI saga which had to be managed.
Challenges to be Addressed
Honourable Pravind Kumar Jugnauth then spoke about the challenges which the country will face. First, a higher growth rate must be achieved in view of avowed ambitions at a national level. This will create jobs and provide more opportunities for all Mauritians.
The minister also stressed the importance of grappling with the challenges facing the four traditional pillars of our economy, namely the financial sector, tourism, the sugar and manufacturing sectors, given the international context, without forgetting increased competition.
BREXIT, with its foreseeable impact on our economy, along with sloth at the level of private investment constitute other challenges.
For Honourable Pravind Kumar Jugnauth, government is confronted with the problem of low-level investment by the private sector. The question is: Should the government make up for the lack of investment when higher public spending will only increase the budget deficit and, concomitantly, public debt?
The Minister of Finance and Economic Development stressed that he would prioritize fiscal discipline and financial prudence. These translate government’s resolve to bring public debt below 50% of GDP in 2018.
Pressing challenges will be addressed in the forthcoming budget while other long-term ones must also be kept in mind, for instance the impact of an aging population on the economy and society.
In terms of employment, the Minister highlighted the mismatch between market demands and the skills available following training dispensed in Mauritius.
To address this anomaly, the government is committed to reforming the education system to align it on global trends and developments in order to meet the requirements of employers.
The minister also stressed the necessity of reviewing our production tools and our technology given the challenges posed by climate change.
Honourable Pravind Kumar Jugnauth explained that, given that our world is constantly changing, it is imperative to change our mindset, our habits, the performance of our institutions, as well as our legal framework.
It is with this imperative in mind that, since his appointment as Minister of Finance and Economic Development on May 26, 2016, he has given undivided attention to budget proposals in order to better understand the stakes and people’s expectations.
The Prime Minister, Sir Anerood Jugnauth, had already initiated consultations for the budget, since he held the finance portfolio from March 14 to May 25, 2016.
At the end of his presentation, Honourable Pravind Kumar Jugnauth said he had earlier received Cabinet’s approval for the budget to be presented on July 29, 2016.