Thursday, April 5, 2012

Fiscal Policy Should Catch Up With Monetary Policy

Well, you've seen where the irresponsible flat tax has led us to: next year debt service is expected to exceed our education budget by a whopping 40% after surpassing it for three straight years. Nothing for policy makers to be proud of. Really. And debt servicing has increased so much because the economy did not grow as fast as it should for the crappy policies that put 1% of the people first to be sustainable.

Of course the Mansoor/Sithanen Toohrooh will get bigger and bigger unless two dumb things are done: one is to slow down essential expenditure and the other one is to privatise public assets through a gimmick called strategic partnerships. Something which Jack Bizlall has already understood and he is gearing up for a fight with an interesting platform. To bring back some sanity to fiscal policy. I suspect we could see the same momentum we witnessed with the Chagossian petition.

On its side monetary policy has been relatively very good for the past five years. Because it has been working in the interests of all Mauritians -- not just the richest ones. Which makes it sustainable. Our rupee has well-behaved too cushioning as far as it can the irresponsible fiscal and other bean-counting experiments of two university buddies.

Does the Minister of Finance understand what's going on? I am starting to have some serious doubts.


akagugo said...

Jack gearing up
Hopefully Toolsiraj will do same.

Xavier would be well-advised to go and ask the same people that he was helping during his time at the Ministry of Social Integration where they save money, and he may be surprised that not much of them know about investment funds, retirement plans, super-annuation funds and what not that the most affluent normally resort to when thinking about their retirement.

How I want to be wrong in my prediction that soon enough Rama will emerge from some toorooh to congratulate Xavier: "Couldn't have done better".

akagugo said...

Would you believe it: Xavier misses his former assignment... Already?

Sanjay Jagatsingh said...

Where they save money? Hey they are busy giving a Standing O for the moment. Maybe when they're done they can start thinking about these trivial matters.
Speaking about tooroohs we still have to estimate the size of the mega-toorooh created by the father of Paglanomics.

Sanjay Jagatsingh said...

Isn't that nice that two events are concurrently fuelling a good feeling of national unity: the crazy attempt of Collendavelloo to privatise the CWA and the deadline given to the British about Chagos?

Didn't hear Jack Bizlall on the CWA recently though.

Sanjay Jagatsingh said...

Just listen to this guy competitiveness has more to do with the quality of human capital than with fiscal and monetary policy. Or that "we cannot get out of the middle income trap without robust brain power." We've got plenty of quality of brain power. They're not being given opportunities to help push Mauritius forward. Irresponsible fiscal policy has broken the economy. And we know what happens when we have a depreciation-obsessed fellow at the BoM.

He's for the streamlining of the welfare state. Think his per diem should have been provided in rupees.

He's for keeping interest rates low. Has he checked the latest inflation figures?

Private sector not investing because of global uncertainty. Really? This means taxes should go up so government can make the economy grow faster.

Gosh, so much rubbish in one interview???

Sanjay Jagatsingh said...

Sorry, here's the link. Enjoy the christmas pudding.

akagugo said...

The argument that we should all be grateful to the ultra-rich is bunkum. As the paper concludes: “The overarching policy question is the following: in the current era of fiscal consolidation, should the rich be taxed more? Our evidence suggests unequivocally yes.”

Guess that this study will never get any discussion in our local press anytime soon, eh?

Sanjay Jagatsingh said...

Two things:
1. at around 20% of GDP government revenue was quite low here and the welfare state if supported quite basic. In France it is close to 60%.
2. Local 22.5% top tax rate back in 2006 was low too. Compared to the 45% paid in the UK.

There has been discussion of these issues in the local press. For sure there has to be more.