Latest IMF Staff Report is Another Big Time-waster

I’m definitely not spending more than a few minutes on a report (it’s not the only one) that says right off the bat that our economic performance was solid before the pandemic appeared. In 2020 COVID-19 caused a damage of about 100 billion rupees to the Mauritian economy while the GDP shortfall of the 15% flat tax (a Bretton Woods best practice implemented by one of the boys) between 2006 and end of last year was over Rs2.1 trillion. That’s more than 21 times the economic loss from the pandemic.

It’s no surprise then than the IMF/WB have created famine and failed to predict huge uprisings. How much is that litre of oil again now?

Why Our Government Hasn’t Been Functioning Properly

Three words. Sithanen flat tax. As it never produced the higher growth rates (8%) our central government has been piling up so much debt – increasing from a total of Rs106bn to Rs278bn between 2005 and 2018 – that it had to resort to creative accounting, push up the debt ceiling several times and has failed to solve many national problems. The USD has also appreciated by one-third against our rupee over the past 15 years. Not a good sign. Definitely not what you’d expect from a Tiger. But pandemics have such a way of bringing back sanity. 

Bérenger Says He’s the Real Miracle Man

And not Lutchmeenaraidoo because he did all the work after the 60-0 in 1982. This is another funny statement from him because he was Minister of Finance for only nine months and if you read Cuttaree’s Behind The Purple Curtain you can’t fail to notice that about the only thing they were busy doing until March 1983 was fighting each other inside the alliance. This of course leaves even less time to do good work. Furthermore if a neophyte in 1982 can create an ‘economic miracle’ with one budget surely he will be able to do at least as well if he ever returned as Finance Minister later.

The trouble for Bérenger is that he did return as Finance Minister in 2000 and got the chance to present not one but three budgets. And what did Cuttaree have to say about the state of the economy after those budgets? Something very interesting: “Nous sommes en urgence économique. La situation est sans précédent.” It was a period in which almost twenty-three thousands jobs were lost in one industry alone in a few years. Mr. Bérenger of course described the situation differently dubbing Mauritius the best managed country in the world. What else to expect from a party with more than a little penchant for self-aggrandisement?

Knowledge about the economy is not something that the MMM seemed to have got better at since. Reza Uteem, their shadow Finance Minister, was heard a couple of years ago on a radio saying that the offshore sector needs a stimulus package. The MMM has also set saving the dead sugar industry as a top priority in its electoral manifesto. It doesn’t do well on other important national issues either. 

Riptir, Nuvo Palab Ramgoolam

Ramgoolam pan konvink buku dimun dernye sinq banane ki lin sanze apres sa siro zanana li ti gayne an 2014-la. Li pan tarde pu pas den staz kot li ti pe dir ki lin fer lerer a en lot kot li dir ki elekter pena lespri. An dot mo ki nu ban gopia. Kav li panse ki nu amnezik si parski lin reamen Sithanen, bug kin kas lekonomi, tuy sevings, ek fer en ta lezot kuyonad kuma stimilis pakeg ek depresye rupi. Li anvi tuy nu sistem electoral usi. Devet samem riptir Ramgoolam: kontinye kraz partu kuma ant 2005 ek 2014.

Sithanen trakase ek buku kitsoz i konpri inegalite. Be anu tiek en kut kin arive par gato nasyonal ban diferan klas menaz sak fwa ki li fin minis. 

How Navin Narrowly Avoided Defeat in 2010

After bagging a historic victory in July 2005 – the first time one of the three big parties beat the other two – on the promise of democratising the economy and Putting People First, Ramgoolam’s second mandate rapidly turns into a nightmare. Rupee slides, rich made to pay the same low tax rate of the poor, our basic welfare state is tampered with, the savings culture is destroyed, doors are wide open to allow foreign investments to quash the dreams of thousands of Mauritians to become homeowners and unfair labour laws are passed. The situation is so bad that the then PM has to give another Presidential mandate to SAJ as well as help get the current PM elected before negotiating an alliance with the MSM. 

But the damage done by Sithanen and Mansoor is so large that Ramgoolam has no choice but to also dump the toxic bean-counter. Luckily for him the opposition makes a series of mistakes and this enables him to stay in power by winning 49.7% of the votes against 42% or as the chart shows by a margin of about 150,000 votes. Had Ramgoolam given Sithanen a ticket in 2010 he would probably have lost as the bean-counter would have set back his side by 100,000 votes. It’s no coincidence either that Berenger didn’t invite Sithanen to join his alliance. 

Another Pope, Another Mauritius

When he visits us tomorrow, Francis will find a Mauritius that’s very different from the one that greeted the most travelled Pope ever, John Paul II, thirty years ago. As the chart shows we’ve regressed in all but two ways. The cake produced over the four years before Monday’s trip (cake increase) is almost two-and-a-half times smaller, savings have collapsed, rupee has lost more than half of its value, road fatalities over the last four years are about a quarter higher and unemployment two times bigger. Inequality has also increased substantially. More on this later. 

Many of the problems we’re facing can be traced back to the 15% flat tax which has placed public finances in a critical position. Indeed at the end of 2018 there was Rs1.5tn of GDP missing which should have generated Rs300bn of revenue for our government. This would have made the latter debt-free. No wonder then that there’s plenty of signs we’re in big trouble the latest being that more than 50% of the vehicles at our fire stations and pumps don’t work. This shouldn’t be a surprise for Francis who has stated publicly several times that trickle-down doesn’t work. Let’s see what he says while he’s here. 

How Our Offshore Treaty Risk Became a Much Bigger Problem

With 640m multidimensionally poor people in India in 2005-6 and the internet making millions a lot smarter it was natural that the pressure to renegotiate the DTAA with Mauritius would increase significantly. So it was sheer stupidity for one bean-counter to flatten our tax structure to a rate (15%) that has caused serious damage to our economy in order to build a facade of low-tax jurisdiction. Besides we never voted for this crap aka Paglanomics or if you prefer Shaitanomics in 2005. Killing our savings culture was not exactly another smart move. Neither was gifting a sunset industry €138m — its weight in the economy was more than six times smaller at the end of 2018 (0.5%) than it was in 2005. Add the severance of the link between what we pay for oil and what it costs on the world market and stupid hire-fire laws to understand why we’re heading into a wall. 

And a few days ago he uttered more rubbish including that without our Global Business (GB) sector — this is where he’s been working for many years — our currency would maybe have been trading at Rs50 to the USD. Scare tactics by Dr. TINAnen. But as the chart shows it took only five years from the inception of that sector for our rupee to lose a quarter of its value and a further five to shed almost another 25% of the average value it had in 1992 — an index of the dollar value of our rupee is used so that when the curve is going down it means our rupee is losing value with respect to the USD, makes it easier to visually estimate its percentage changes and we’ve added two horizontal lines to show two values of our rupee relevant for our discussion here in the format you’re used to seeing it. 

This chart will also help put the myth that Ringadoo was a bad Minister of Finance because he devalued the rupee by 30% and 20% in a better perspective. See our rupee lost 55% of its dollar value between 1992 and 2015 in an economic environment that was incomparably better. In fact we would probably have hit another dismal low had there not been a BoM Governor who knew what he was doing between 2007 and 2014 to resist energetically an incompetent Minister of Finance who when asked why the rupee had been depreciating rapidly replied that it had not depreciated for a long time. For sure current trade imbalances reflect to a great extent the generalised policy-making failure of the past dozen years. Our rupee will enjoy better days as soon as we get our act together. Just like India who had by 2015-6 reduced the number of poor people by 271m.

3 Reasons We Are Not a High-income Country

The first one is land use. If we removed all the sugar and replaced it with what we have elsewhere our GDP per capita at the end of 2015 would have increased by 48.5% to $13,575. And given us access to the high-income club.

The next reason is currency policy. If we had kept our currency fixed at its 1985 level of 15.58 rupees to the USD -- not a lot to ask from a Tiger as the majestic cats have been known to increase their exports while their currencies appreciate -- our GDP per capita would have been 2.25X larger. That is it would have climbed to $20,608.

The final reason is the devastating effect of the 15% flat tax. If we had clocked the average 8% growth rates promised since 2005 our output per capita would have shot up to $13,136 in 2015. Or about 44% higher. Which is by the way roughly how much the crazy land use has cost us. And gives us precious information to assess relatively recent policies.

Finally if we had no sugar cane, had been very reasonable with our currency and had clipped the robust 8% growth our GDP per capita would have been $43,971 or 4.81X bigger than where it was at Christmas time in 2015. This of course would have been 83% of the corresponding number for a famous South-East Asian Tiger.

Miow.

RIP Sugar

It's heading there. Less than 1% of GDP now and declining further. It would already have been dead if so much good money had not been thrown after its bad situation. And if it was not for the completely silly policy of competitive depreciation. I heard Krepalloo Sunghoon mention that it costs Rs17,000 to produce one ton of sugar that now sell for less than Rs15,000. How much bigger would the loss be at the very reasonable rate of 25 rupees to a dollar? No wonder then that thousands of acres of sugar cane have been abandoned. But that's kind of natural. We can't pursue activities that are incompatible with the kind of money that is needed to live properly here. Unless if we want to allow modern forms of slavery like too many seasonal workers and God knows what else. Just like we use cars and buses to go to work. And not horses.

We should use the land under sugar cane to grow food and to create more productive opportunities for our unemployed youth. So that we move Mauritius forward.

Ki Piariv Nu Peyi?

Samem promye zafer enn kamwad finn dimann mwa zordi. De pli an pli dimunn pe truve ki kondisyons pe deteryore Moris. Revelasyons komisyon lor ladrog pe fer nu konpran lanpler fleo la. Konbin sa ek inegalite ek povrete ki flat tax Sithanen ek bann lezot politik pagla finn kree: 44 fwa plis dimunn finn tom dan la povrete ant 2007 ek 2012 ki ant 1997 ek 2002 – 22,000 kont 500. Ek lor 11 banane mank 1,000 milyar rupi dan prodiksyon nasyonal. Proliferasyon bann kazino ek lezot gambling house dernye 10 an finn anpir la sityasyon sirtu kinn etabli bann lyen ant rezo ladrog ek lindistri zugader. Azut depresyasyon rupi ek bann lezot politik dan dife pu u konpran kot nun arive ek kot nu pe ale.

Deza ki Moris nu ti setiem peyi kot litilizasyon lopium par kapita pli elve dan lemond. Nu bat Pakistan ki vwazin ek Afganistan – pli gro konsomater par kapita dan lemond – ek wityem. Devine kisana dernye. Pa tro difisil konpran kifer nu enn sanpyon dan brain drain. Bann seki sanpyon dan admir zot lonbri apel sa skills mismatch.

FMI truve ki lekonomi robis. Mo dimann mwa kot zot pran rasyon. 

Currency Policy Incompatible With Feline DNA

GDP per capita for Mauritius was only $9,142 at the end of 2015. That placed us at spot 68. We would have done a lot better had we not adopted a policy of 'competitive depreciation' for the better of thirty years. If we had kept our currency fixed at its 1985 level -- which was not too much to ask from a Tiger -- then we'd be 32 spots higher. Or just above the Arabia of the Sauds. And in the company of other high-income countries.

We were also stuck below the $10,000 threshold because the Sithanen flat tax has broken our economy. Had we kept on growing at 5.5% since 2006 we'd be seven notches higher. Fourteen if the 8% growth rates promised by the bean-counter had materialised.

In the meantime another Tiger has confirmed her stripes. A combination of high growth rates and systematic currency appreciation -- 60% over the thirty-year period -- has pushed Singapore ahead of Germany, Sweden and even Denmark.

Only dimwits will believe that 'competitive depreciation' is painless.

How A Referendum Would Deepen Our Democracy

There are some issues that are really fundamental to our well-being and these are better addressed in a referendum. Especially when they are not discussed in manifestoes and electoral campaigns. Here are four.

1. Tax policy can break an economy and send a country to the dogs. Which is what the Sithanen flat tax has done. And that too without asking us for our permission. 

2. Currency policy. Only morons believe that competitive depreciation is Tiger stuff. Plus it matters a whole lot who call the shots at the BoM. For example in 2010 we were told that Manou was coming back. We didn't know depreciation-obsessed Basant Roi would after 2014.

3. Party lists are the equivalent of an English Premier League without red cards. We don't want them.

4. Privatisation of any part of our public utilities or other national assets. A government that wants to sell the CWA or saddle it with a management contract because it doesn't like its hotline is a good-for-nothing government.

Oxfam Warns Unjust Society Not Sustainable

The recently published report has a number of interesting stats including:

1. 1% of the world's richest are wealthier than the remaining 99%
2. 8 men are as rich as the planet's 50% poorest
3. income growth for the bottom 50% has been zero over the last three decades while the top 1% have enjoyed a corresponding increase of 300%
4. it takes 10 years for the poorest person in Vietnam to earn what the richest person there makes in a day

The report also highlights how politics may be highjacked so that rules are written in favour of the 1%. I guess a bit like the Sithanen flat tax which has caused 22,000 Mauritians to be thrown into poverty over the first five years of Shaitanomics while incomes for the bottom 10% have risen five times slower than the corresponding income for the top 10%. There's also a trillion-rupee GDP shortfall and the very dumb policy of 'competitive depreciation' which has quickly dumped us into a recession -- in USD terms -- a mere three months after the December 2014 polls.

Did You Say Air Corridor?

Getting flights from Changi to Plaisance won't hurt us. But Mauritius is unlikely to become the bridge between Asia and Africa that politicians want us to believe. As far as air traffic goes. You just need to look at the current flight patterns -- save that link to see how they change as the day progresses.

Good to also note that most of the air trips in Africa are between countries on the mainland. Besides we'll not get any of the flights that originate from west of the Atlantic coast of Mama Africa.

And then there are Dubai and Tambo and many others.

But heh, don't worry. No one can beat us when it comes to the dumb depreciation of our currency.

SAJ's Comments on Electoral Reform Refreshing

Rightly calling PR a komeraz. Who wouldn't? After seeing what happened to election results in Rodrigues. It's the same feeling one got when going through the dumb and dangerous Sithanen electoral galimatia: a heap of rubbish that doesn't take more than a couple of minutes to demolish. A bit like his 2005 promise that a flat tax would generate average robust growth rates of 8% forever after: 2015 will be the 5th consecutive year growth rates will be less than half of that.

Besides PR is so unLabour: Phillippe Rozemont was expelled from the Labour Party when he voted in favour of it. And roughly six decades later Navin Ramgoolam lost power and his seat after he flirted with PR. When an overwhelming number of Mauritians -- using an attractive feature of our wonderful FPTP system but one that Sithanen wants to get rid of with party lists -- said no to an electoral proposal that is vote wise and outcome foolish. There is no need to use a bazooka to get rid of a very mild headache.

Refreshing indeed. Reminded me of what another of our PMs said back in May 2010: "Ki zot tile? Pran zot dan godi dir ayo papa Euro! Euro! donn zot bibron? Pa Pwena! Devaliasyon zame tienn solisyon. Nu bizin vinn pli konpetitif".

Judging the Overall Quality of A Country's Policies

A shortcut is to chart the value of its currency over a couple of decades. And if we compare the latter to the level of exports -- let's say for Mauritius and Singapore -- we get an indication of the strength of the local entrepreneurial fibre. Of course we can use our good old policy matrix. Or have a look at the land use. Or the type of bets that are made and at what cost. Traffic congestion is also a pretty good indicator (Istanbul has the world's worst traffic). And how can we forget fiscal policy?

So I guess we can gauge the DNA of a country pretty fast, eh?

What Will Municipal Voters Do?

Vote for the MMM because Lepep ended up with about 10 MPs more than what was necessary? Or stick with Lepep based on what they've achieved in the first five months of their mandate? The plus points are mostly the increase in pension payments and fully subsidising the SC/HSC exams. The appointment of Ms. Fakim as head of state is definitely a history-making event but that doesn't really change the lot of the victims of the neocons.

The main negatives are the significant depreciation of our rupee while the BOM supposedly waited for the budget to set the tone, the joke of the Finance Minister claiming that his bland budget was a no-tax one, not passing on the collapse of oil prices and of course the BAI affair. The latter has embroiled Government into a thick cloud of confusion and suspicion that is not going away any time soon. Indeed the BAI saga is so far looking more like a political vendetta than a ponzi scheme. That's especially evident when you consider the kind of help our Governments have dished out to hubris-infected companies in the past. There have also been surprising statements by the President of the Bar Council and many are not happy with how the biometric ID project has evolved.

We'll find out on Monday how voters weighed the facts.

Read The Manou Bheenick Affidavit Here

Vishnu is Lucky, Again

To be Finance Minister these days. After almost a quarter of a century. Because that's after almost 10 years of the worst economic management -- Paglanomics -- our country has seen and started by Rama Sithanen with the help of Bretton Woods Ali. And of course with the blessing of Andrew Scott and one pseudo-socialist, Navin Ramgoolam. So improving things should not be that difficult. For example increasing pensions has helped compensate the lack of reasonable progress that the weakest groups of our fellow countrypersons have registered with the toxic bean-counters. And there are many more low-hanging fruits to pick.

But monetary policy was definitely not one of them. So it was quite surprising that Manou Bheenick was asked to leave. And replaced by depreciation-obsessed Basant Roi. Who unsurprisingly since returning to the BoM less than 80 days ago has presided over a double-digit depreciation -- 12% as of today -- of our national currency against the USD. After our central bank had issued a communique on January 30 informing the nation that there would be no MPC meeting in February because Lutchmeenraidoo's budget was due March 16. Or 45 days later.

Hopefully the Minister of Finance who keeps on insisting that he will deliver a 'second miracle' understands how to assess the quality of economic policies. Computing our real GDP growth in USD for the current quarter might be quite enlightening.

Government To Destroy Biometric Database

This piece of good news was announced yesterday in the 2015-2019 Programme Speech. Along with a number of laudable intentions like

• making SC/HSC exams free;
• an SME bank which will invest Rs10 billion over the next five years;
• a minimum wage bill;
• focus on job creation for Mauritians: 15,000 will be created every year with many in the public sector;
• a football academy will be set up;
• ensuring competitive energy prices;
• setting up a vascular surgery unit to reduce the number of amputations;
• and organising referendums on crucial national issues. 

There are also some very vague promises such as 'inflation will be kept under control'. Hmm. An inflation target is a must for two reasons: one to preserve the hard-won anti-inflation capital and two to keep depreciation-happy Basant Roi on a tight leash. Government also wants to include a dose of PR in our electoral system. That's a dangerous proposition that needs extensive debate and a referendum.

Let's see how well this plan is implemented.