Getting the economy off life support system
In the wake of the novel corona virus pandemic, Governments around the world threw, rightly, an array of accommodative fiscal and monetary measures at ailing firms, workers who were deprived of any income and other vulnerable groups of the population. The world has never been in such a dire situation, having to deal with a mix-up of a health, economic and financial crisis at the same time. The support system put in place was essentially to allow the economy to walk the tightrope with one side a staggering death toll and the other, firms which were hemorrhaging vital liquidity.
Mauritian economy not spared
Like all global economies, Mauritius has witnessed its worst contraction and the Government of Mauritius has been prompt to react to solvency risks posed by the pandemic and mitigating the ensuing social and economic impacts. A record low repo rate of 1.85%, credit repayment moratoriums to economic operators including SMEs and households, setting up of the Mauritius Invest Corporation (MIC), a plethora of loan facilities by the Development Bank of Mauritius, the Investment Support Programme, the setting up of the SME Equity Fund and the hefty Wage Assistance Scheme of over MUR 24 Bn and counting, have served as a backstop to ensure that there is enough liquidity flowing into the economy.
However, with a protracted covid-19 pandemic, the positive impact of short-term measures on the economy can be illusive.
With some sectors showing timid signs of recovery, especially construction, the pulses of other areas of the economy remain uneven and anemic. The tourism sector has taken the full brunt of the pandemic which remains over the barrel with a closed border.
Pulling the plug?
Budget 2021/2022 comes at a time when the Mauritian economy is standing at a crossroad of its future socio-economic development with undoubtedly tough calls to make by the Minister of Finance, Economic Planning and Development. Though we have immediate concerns to resolve, we should not lose sight of deep structural reforms that have become more than ever necessary. Policies should be able to free limited and scarce resources faster from tottering industries and channeling them towards growth-enhancing activities whilst accelerating our digital transition.
By Bhavish Ubheeram