R.Chand
25 April 2008
editorial
Port Louis — Please allow me to draw your attention to the issue that Raj Meetarbhan has raised in his editorial «Chère Roupie».He says that «l'Etat ne dispose pas de moyen d'action pour alléger la pression sur la roupie» . While other economies are responding and adjusting to the international price signals, we are subsidising petrol and gas, users of cars and middle class users of LPG and end up with prices that are nowhere near reflecting the global prices and at the cost of creating big gaps in the trade account.
Is that sustainable? One should also be careful about copycat references to Singapore which deliberately allowed its exchange rate to appreciate in the mid-1980s. From a low manufacturing base, Singapore reinvented itself and went into high-end manufacturing and financial services. We willingly missed the boat for massive human capital formation in the late 1980s and opted instead for the prodigal «no tax budgets», while Singapore coming out of its successful job creation programme in the late 70s prepared the economy to move to its next phase of development.
Prior to the appreciation of the rupee, de manière delibérée, the government started a program of economic restructuring. This was achieved by modifying education policies, expanding technology and computer education, offering financial incentives to industrial enterprises and launching a productivity campaign Like India which took measures to stem the flow of capital inflows, we, too, have a variety of options.
As for the NPF and SICOM investing the money abroad it was a suggestion of the IMF to get rid of the excess foreign currency on the local market. Please note that by futilely borrowing abroad at present Government aggravates the problem.The real exchange rate is slightly overvalued in last quarter of 2007. So there are reasons to believe that the present value of the exchange rate does not reflect the fundamentals of the economy.
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