First Vishnu Budget in 25 Years Now Available

Given that it was supposed to be a 75-minute budget I listened to most of it. It's a lot more pleasant than those that were presented between 2005 and 2010. There are a number of interesting things like gaming houses leaving city centres and the ban of plastic bags. Which has been in force for over nine months in Rodrigues. And they have increased their lead having recently announced the sorting of garbage like some countries do. Promising to implement the report which looked at making banking practices fairer is also not a bad idea.

Of course it's not a no-tax budget. Government has already quietly depreciated our rupee -- 12.8% as of today's speech -- and kept petrol prices higher than they ought to have been. The steady depreciation will make sure that Mauritius doesn't benefit from the collapse in oil prices. Again.

There are also other problems with this budget. Like inequality is likely to persist. More on this later.

What did you think?

Basant Roi Back, Rupee Down By 3%, Already

By yesterday our currency had lost 3.28% of its value against the dollar. In the mere 18 trading days since Basant Roi has been back at the BoM. He is known to have a strong and silly depreciation bias. In fact if you had to chart the number of times he has asked for a lower value for our rupee -- when he was not in a position to sink it himself -- you would literally have to use a log scale.

I hope Mr. Lutchmeenaraidoo's idea of a "second economic miracle" doesn't involve making Mauritius increasingly insignificant in the world. And keeping local pump prices artificially higher after oil prices collapsed is kind of contradictory about making SMEs the backbone of our economy. And is oblivious to the fact that he is presenting a budget in a few weeks. Besides we've been suffering from such a disconnect for way too long. And for very wrong reasons.

All has not been bad though. Swiftly increasing pensions to Rs5,000 will surely help restore some disposable income to those who need it the most. And that cannot do our economy any harm.

Jaufeerally Pleading For End of Growth Worship

That was in a very refreshing interview where he warned that our present model is simply not sustainable. I totally agree and have been using my megaphones to get this point across. Karim also found a big disconnect between the lofty speeches and what's get done about our environment. I don't disagree one bit.

Pump Prices Remain At Unreal Levels

Almost two years after they collapsed on world markets. The green line represents the evolution of IPE Brent oil after adjusting for the MUR/USD exchange rate while the red one charts local pump prices complimentary of early harvest and bumper crop.

And that's supposed to:

1. have made us more resilient during the financial crisis? 

2. be an external shock?

Beats me!

State Attempt to Clamp Down Free Speech Backfires

And angst-ridden Sithanen releases grants of consumer advocacy group ACIM in a hurry. You will recall that these were withheld for a year when the latter protested against the abusive petroleum prices that the good people of Mauritius were being fleeced with. The official explanation is that the STC lost Rs3 billion on hedging operations and that the organisation has to recoup the shortfall by making us pay for it.

The snag is that with the automatic pricing mechanism the STC didn't have to do any hedging as pump prices should inextricably reflect international prices. Rs3 billion is a lot of money. Government could have used this sum to make the SC/HSC exams free for several decades. And Sithanen still hasn't told us how all this happened.

Aren't you happy you're gonna vote soon?

How to Fix our BOP Problems

That's kind of simple and, no, we don't need to depreciate our rupee as one ex-Governor has again been suggesting. We just need to reduce imports and increase exports. First, imports.

In 2008, we imported for Rs8.5 billion of fish and fish preparations, Rs3 billion of milk, Rs2 billion of vegetables and fruits, Rs1.5 billion of meat, Rs6 billion of road vehicles and Rs24 billion of petroleum products. That just doesn't sound right. If you recall, our exclusive economic zone is more than a 1,000 times larger than our land area or if you prefer each Mauritian can be supported by 1 square kilometre of sea (although it would make more sense to speak in terms of cubic kilometres, right?). So am positive we can cross that one out in a few years. There is a milk project underway so imports should decrease there too. As far as vegetables go we could adopt a few of Kreppalloo Sunghoon's recommendations: subsidise fertilizers, remove VAT on agricultural machinery and create a land bank to optimise the use of arable land. Likewise I am sure we can do something about all the meat we're bringing over from abroad by getting Rodrigues into the loop. Finally, we can reduce both the amount of fuel and road vehicles we import by having a sufficiently comfortable public transportation system. Having it run till 2 a.m. everyday will also make our economy more dynamic.

As far as exports go we should favour those that will provide meaningful jobs to a maximum of our fellow citizens. We don't need entrepreneurs of the sweat-shop variety whose greed knows no bounds.

Mr. Speaker, Sir, I now commend the Bill to the House.

P.S: BOP = Balance of Payments.

Stupid Before the Event

For sure if the price of oil had hit USD200 a barrel and stayed there for most of the duration of the derivative contract MK got itself into it would have made tons of money. If we assume the instrument involved has a symmetrical payoff -- we'll know for sure when a fact-finding committee is set up -- it is not difficult to estimate that amount given that Air Mauritius now stands to lose about Rs5.5 billion if oil prices stay about USD65 lower than their USD105 contract price till June 2010. I am getting something like Rs4 billion per year for 2009 and 2010. Does that sound about right to you?

And depending on how the CEO is compensated, he could have taken home a bonus that would have made his outrageous close-to-a-million-a-month earnings pale in comparison. This in turn could explain why it seems that he and the board acted in a way that a prudent person wouldn't by forgetting to ask a very basic question that would have avoided if not mitigated this mess: How much do we stand to lose?

Top 10 Reasons Why Solutions to 95% of Our Problems Are Not Domestic

No. 10. More reasonable electricity prices have been promised by Navin Ramgoolam for more than a year now. You should blame Mick Jagger if you've been waiting for Godot.

No. 9. Oil prices at the pumps remain high and are killing our economy to finance the reverse Robinhoodness of the flat-tax duet. Not really. It's Deepika Padukone's fault.

No. 8. More than a third of the students who fail the CPE do so because the exam is way too difficult. That of course is U2's Bono's fault who's been dishing out one great song after the other and disturbing our kids.

No. 7. Record FDI pouring into the country since 2006 should have made everybody richer through an appreciating currency had our national bean-counter along with the then Governor not been in a hurry to create double-digit inflation. Just kidding. If our currency crashed in the second half of 2006 it's because Scorpion Queen Khun Kanchana didn't hold the little darlings in her mouth long enough.

No. 6. The controversial reintroduction of the daylight saving time was imposed on us by Bernard Madoff.

No. 5. We have to blame Aung San Suu Kyi for staying too long at home if Sithanen did not anchor our inflation expectations by not providing the Bank of Mauritius and hence the country with a target range for inflation as required by the law between 2005 and 2010.

No. 4. Navin Ramgoolam has been PM for close to 9 years and our traffic problems haven't improved. Far from that. Nah, it's because Paris Hilton hasn't been partying hard enough!

No. 3. If Air Mauritius is technically bankrupt it's not because we have an incompetent bunch managing it. No way. It's because Hillary didn't win the Democratic Party's ticket in the last US President election.

No. 2. It is very easy to establish a link between the fact that we don't have a sufficiently comfortable public transportation system and the number of Asian lions that were born in 1859.

And the No. 1 reason why solutions to 95% of our problems are not domestic is

No. 1. People lost their lives in flash floods in the same week that water stoppages were in force in 2008. That of course is because the snow atop Mt. Kilimanjaro melted earlier than usual.

Oil Prices Should Come Down Immediately by 25%

From its current level of Rs 34.10 a litre. That would bring it to about Rs 25 a litre which would be closer to real prices. The recent modification of the APM formula from 20% quarterly variations to 7.5% monthly variations is the latest of a series of intellectually dishonest arrows that Sithanen has been retrieving from his bean-counting quiver. It is a device to prevent Mauritian voters from immediately benefiting from the collapse in oil prices so that his ability to fleece us with a 15% VAT remains unchecked. 

That's kind of stupid because energy is an important building block of our competitiveness. In fact, he should have capped the amount of money government makes when oil prices went through the roof between July 2005 to July 2008 and rapidly reduce pump prices when oil prices collapsed thereafter. Of course that's way too much to ask from a bean-counter. He preferred instead to viciously tax us to death when oil prices skyrocketed and come up with a little contraption to keep them artificially high when the latter crashed.

Reintroduction of Daylight Saving Time Confirms Mauritius Hasn't Got Its Priorities Right

Especially after you consider the government's dumb response when oil prices almost tripled from USD 50 to USD 147 a barrel over the last three years has been to make the purchase of bigger cars easier. Not making a sufficiently comfortable and reliable public transportation system available so that commuters would leave their cars at home is additional proof that we are suffering from a serious breakdown in leadership and management here.

It would also have been better for Ramgoolam to make good on his year-old chess-thumping promise of reviewing the abusive IPP contracts. Speaking about priorities, here is one more: we need to build another reservoir as quickly as possible or we run the risk of a repeat of 1999 when a serious drought halved our economic output. The latter risk, you would have noticed, is an entirely domestic issue: I guess you can call it an internal shock.

After Massively Creating Poverty, Minister Now Aiming to Kill the Economy

For an open and small economy like Mauritius if there is one concept that we should focus all of our energies on it has to be our competitiveness. Not something Sithanen has on his mind though.

After having made an indecent gift of Rs5 billion to a industry that has been dead for ages, he now seems to want to shut down Mauritius Inc. by not capping how much money government makes on rising fuel prices through VAT.

That's on top of uncompetitive electricity prices that reflect the vested interests of a few rent-seekers and public investments that have declined for three straight years in real terms. Which means that we should expect more misery and trouble until he is shown the exit.