allAfrica.com: Mauritius: MEF " We cannot Underestimate The Existing Risks to the Economy " (Page 1 of 3)

The MEF lays emphasis on the host of social measures that characterise the 2008-2009 Budget, saying that inflation, education, food and energy security as well as poverty alleviation have been given due attention. However the economic recovery remains fragile given the difficult and unpredictable international economic environment.

Around Rs 42 billion have been announced in the Budget 2008-2009 to reduce traffic congestion and modernise our road networks.

Introduction

The presentation of the 2008-2009 Budget Speech provided the stage for the Deputy Prime Minister and Minister of Finance and Economic Development to unveil Government's 'AMIGO' plan for building an Attractive, Modern, Inclusive, Green and Open Mauritius.

Boasting an improved macroeconomic performance that has been delivered thanks to economic reforms initiated since 2006, Government has been able to conjure up sufficient fiscal room to address some of the major economic and social concerns of the Mauritian economy whilst bringing down the budget deficit as a percentage of GDP and granting a Rs5.2 billion payout to public sector employees.

It is noteworthy that much of the pre-Budget expectations of employers in terms of the pressing economic and social issues that needed to be addressed in the Budget have been realised. Inflation, education, food and energy security, infrastructural bottlenecks and poverty alleviation were some of the important concerns of employers according to an opinion poll conducted by the MEF.

Inflation and Purchasing Power

Although the responsibility for maintaining price stability and keeping inflation in check lies with the Bank of Mauritius, Government may use fiscal measures to influence prices and the purchasing power of consumers. Thus, in order to increase the disposable incomes of households and provide some relief from the continuing loss of purchasing power due to high inflation, a proposition by the MEF to raise the income tax exemption thresholds has been retained. Nonetheless, the increase of Rs 25,000 is on the low side considering the MEF had proposed a rise of Rs85,000.

Government has resisted calls for a reduction in Value Added Tax (VAT) which would have applied to a larger basket of goods and services and instead opted for a reduction in customs duties on many imported food items and other articles commonly used by households to the tune of Rs1.8 billion. The Budget contains several social measures to alleviate the hardship of consumers in lower income groups, for instance, an increase in food aid, old age pensions and other social benefits, scholarships to students from poor families and the writing off of non-performing Development Bank of Mauritius (DBM) loans.

These measures come on top of the existing subsidies on basic food necessities such as rice and flour and cooking gas. The decline of the budget deficit to 3.3 percent of GDP and the introduction of Programme-Based Budgeting (PBB) to ensure greater efficiency of public expenditure are commendable measures that may help in the containment of inflation but it is feared that the increase in money supply caused by an average of 36.9 percent salary increase in the public sector and the likely spill-over effects on private sector pay could well give rise to heightened inflationary pressure in the economy.

Education

The Budget lays particular emphasis on raising the educational level of our human resources to support the development of an increasingly service oriented, knowledge based economy.

Government has set the target of doubling the tertiary enrolment ratio by 2015 and several measures have been contemplated for improving access to higher education including the creation of a Human Resource Development Knowledge and Arts Fund of the order of Rs1 billion which will finance the upgrading and building of physical infrastructure for tertiary education, student loan schemes and scholarships as well as specific training and skills projects.

There is little focus, however, on the overall quality of education in Mauritius and a holistic approach to education, training and skills development in general is lacking. A multi-pronged strategy should have been adopted for improving the employability of youths, the workforce of the future; upgrading the skills of the adult population, the current workforce; enhancing the employability of the unemployed and those currently excluded from the labour market; ensuring the development of skills is consistent with the needs of businesses and expectations of society; and instilling a culture of lifelong learning and skill upgrading.

Moreover, the budgetary measures do not deal with the cumbersome training environment which on the one hand does not encourage employers to upgrade the skills of their workforce and on the other does not induce private sector institutions to invest in the education and training sector. Similarly, measures to optimise the use of the training levy grant scheme, especially by SMEs, as called for by the MEF, would have helped to expand workplace learning which is essential for boosting the skills of workers and enhance the competitiveness of enterprises.

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