“The MSM will not require close to 50% of votes to win the elections. It simply has to win where it matters”

Interview: Rama Sithanen, Former Minister of Finance

* ‘For the Opposition to secure victory, the Labour Party must persuade enough voters in the North, East, and South regions to shift away from the MSM’

* ‘Inflation, the worst enemy of the population, has become the darling of the Minister of Finance’

In an insightful interview with Rama Sithanen, former Minister of Finance, we delve into the critical issues shaping the country’s economic landscape amidst political maneuvering and electoral strategies. Against a backdrop of escalating feel-good measures by the current government, Rama Sithanen offers a stark assessment of Mauritius’ economic health, highlighting the stark disparities between official narratives and economic realities. With a keen focus on sustainability and structural reform, his perspectives cut through the haze of electoral promises to address the urgent need for economic stability and resilience. His analysis provides a sobering reflection on the challenges ahead and the imperative for decisive action to safeguard Mauritius’ future prosperity. Additionally, Rama Sithanen shares astute observations on the dynamics of the upcoming elections, emphasizing the complex interplay of rural-urban divides, economic policies, and voter sentiment that will define the political landscape in the coming months.

Mauritius Times: The MSM-led government has heavily relied on feel-good measures over the past five years, and even since 2014, despite disapproval from the IMF and local critical voices, in order to cultivate an electoral base and secure election victories. The recent budget, along with anticipated announcements, appears poised to escalate this strategy further. How far can it go without plunging the economy into serious trouble?

Rama Sithanen: The economy is already in dire straits if we consider the true figures of GDP, budget deficit, public debt, export of services and foreign exchange reserves. And the money illusion effect. These key macroeconomic indicators are being cynically doctored to hide the reality.

The very beneficiaries receiving these ‘feel-good measures’ are paying an extremely high price with inflation, loss of purchasing power, rupee depreciation, more taxes, new taxes, a scarcity of foreign exchange and an official black market.

In addition, the population is also being hit substantially with higher VAT revenue and other indirect taxes rising very fast in an economic model based on high consumption, high imports, high depreciation, high inflation, high taxes and high debt. This is clearly unsustainable.

* However, most people are not economists and do not understand these technical issues such as money illusion and foreign exchange deficits. They often only perceive the feel-good measures, don’t they?

There is an immediate payback already. The population feels the exorbitant prices when they go to buy foods. And the lack of foreign exchanges when they carry out daily operations and transfers. The fiscal and monetary expansion have poured gasolene on the flames of inflation.

The Minister’s toxic mix of these two policies is responsible for 75% of inflation for the last three years. Only 25% of inflation is due to external factors. The prices of some basic necessities have soared by over 20% in twelve months. So, people realise that they are being fooled by higher pensions that are immediately engulfed by higher food and medicine prices. Inflation, which is the worst enemy of the population, has become the darling of the Minister of Finance.

There is a conspiracy of silence about the costing and funding of these measures. The opacity is driven by their unsustainability. They have not been adequately costed, and we do not know how they will be funded in the future.

* Regardless of the outcome of the upcoming elections, if your assessment of an impending economic crisis due to the current government’s populist measures, as evoked by you in a recent radio interview, proves correct, what are the key economic priorities that the next government should focus on, and what policies could effectively tackle these challenges?

All economists worth their salt will tell you that the current economic model is unsustainable, as it is based on the illusion of money. We are trapped in a vicious circle and cycle. To address these structural challenges, we need comprehensive structural reforms and economic adjustments, along with the right combination of fiscal and monetary policies. Read More… Become a Subscriber

Mauritius Times ePaper Friday 28 June 2024