Rajesh Anandsing Acharuz
Mauritius
2 June 2009
Republic of Mauritius Ministry of Finance and Economic Empowerent
Budget Balance (% of GDP)
1410.4
33.2
15
25
35
e of
GD
P
-6.8-4.2 -1.8 -2.7 -1.1
-3.7-3.9
2.2
-7
-13.1
-4.8 -3.4 -5.5 -3.9 -4.1-2.1
2.6
-7.2
-0.2-5.1 -3.6 -4 -3.5 -4.1
-15
-5
5
Algeria Angola Egypt Libya Mauritius Morocco Nigeria South Africa Tunisia
Perc
enta
ge
32.6
48.3
35
45
DP
Current Account Balance (% of GDP)
22
2.96.6
27.6
1.68.1
0.75
15
25
35
Perc
enta
ge o
f GD
Macroeconomic and Modeling / Republic of Mauritius Ministry of Finance and Economic Empowerment
-0.8
-8.8-5.7 -8
-4.5-3.5-0.5
-7.9 -10.2 -11.7-5.3
-1.3-0.4
-10.4-7.3 -4.9
-1.9
-15
-5
Algeria Angola Egypt Libya Mauritius Morocco Nigeria South Africa Tunisia
P
2008 2009 2010
1/19/2010 2
Country Forecasts: EIU Report Apr 2009
High Impact Factors Low Impact FactorsMedium Impact FactorsHigh Impact Factors Low Impact FactorsMedium Impact Factors
Financial Industry Insolvency M t b k hi hl
Fall of commodity Prices (Today v/s Peak in 2008) Oil i ( 70%)
Drop in worldwide Travel and TourismWill ti l ff t i l d Most banks were highly
regulated and not involved in the CDS Markets
Oil prices (-70%) Base metal prices (Copper -70%; Nickel, -80%)
Decline in volume of Global Trade
Will negatively affect island nations the mostWill also impact key destinations such as Egypt, Morocco, Kenya, South
Sharp decline in overall exports Diamond & Precious metal sales volumes have droppedDecline In Financial Flows
yAfrica, Botswana.
Decline In Financial Flows Aid (ODA under pressure) Pledges to increase ODA doubtful Remittances
Macroeconomic and Modeling / Republic of Mauritius Ministry of Finance and Economic Empowerment1/19/2010 3
Portfolio FDI
Real GDP Growth
2.3
5.6 5.45.12.9 3.5
5.27.0
5.48.5
14.0
7.55.3
0 02.7
11.1 10.1
2.5 2.0
6.2
5.0
10.0
15.0
%]
-4.4
0.0
-7.5-8.8-10.0
-5.0
0.0Overall Textiles Tourism Construction Financial servicesR
ate
[%
-14.7-15.0
17 4
21.4
17 1
24.321.2
25.1
19.6
24.5
20.3
24.5
19.720 0
25.0
Savings and Investment Rates1151411419
9000
12000
Foreign Direct Investment Rates
17.415.1
17.1 16.616.714.7
5.0
10.0
15.0
20.0
Rat
e [%
]
2807
7222
3000
6000
9000
Rs
in M
illio
ns
Macroeconomic and Modeling / Republic of Mauritius Ministry of Finance and Economic Empowerment1/19/2010 4
0.0Savings Total Investment Private Investment
2005 2006 2007 2008 2009
0FDI
Budget Deficit (% of GDP) Public Debt (% of GDP)
-3 0
-2.0
-1.0
0.0Deficit
of G
DP
Budget Deficit (% of GDP) 69.6 68.8
63.056.5 60.0
40.050.060.070.0
f GD
P
Public Debt (% of GDP)
-5.0 -5.3
-4.3
-3.3 -3.3
-6.0
-5.0
-4.0
3.0
% o
0.010.020.030.0
Debt
% o
f
Debt
-2
0CAB
P
Current Account Balance (% of GDP)
31 434.7
37.7 35.5
45
Import Cover
-6.4-7.2
-10
-8
-6
-4
% o
f GD
P 31.4
15
30
Wee
ks [#
]
Macroeconomic and Modeling / Republic of Mauritius Ministry of Finance and Economic Empowerment1/19/2010 5
-11.8-13.3
-12.5-14
-12
2005 2006 2007 2008 2009
0Import Cover
High Impact Factors Low Impact FactorsMedium Impact FactorsHigh Impact Factors Low Impact FactorsMedium Impact Factors
Financial Industry Insolvency B k hi hl l t d
Decline in volume of Global Trade Sh d li i ll
Foreign Direct Investments The decrease in FDIs will l i i d Banks are highly regulated
and not involved in the CDS Markets
Fall of commodity Prices
Sharp decline in overall textile, finished goods and other exports. Sector expected to shrink in 2009
slow economic expansion and new projects on the island
yMauritius does not export commodities. Thus this Reduces cost of imports -positive impact instead of a negative one
Drop in worldwide Travel and Tourism.Mauritius has already seen Reduction in arrivals Lower room occupancy negative one
Reduction in Remittances Mauritians are not dependent on money from
Lower room occupancy rateswhich directly impact the airline and tourism sector
Macroeconomic and Modeling / Republic of Mauritius Ministry of Finance and Economic Empowerment1/19/2010 6
family working abroad for survival
Macroeconomic and Modeling / Republic of Mauritius Ministry of Finance and Economic Empowerment1/19/2010 7
The allocation of MUR 6.0 bn [USD 200M] forMay 2008 [ ] Airport expansion and modernisation The creation of 6 funds namely
Manufacturing and Adjustment & SME Development Fund Maurice île Durable Fund Human Resources & Knowledge Fund
May 2008
Food Security Fund Local Infrastructure Fund
The presentation of the Budget Full implementation of Report of the Pay Research Bureau on review of salaries Jun 2008 p p yand conditions of service in the civil service Injecting an additional MUR 1.5 bn [USD 50M] Appropriation of MUR 1.8 bn [USD 60M] as contingencies to support spending to increase demand
Reduction in Cash Reserve Ratio from 5.0% to 4.5% Reduction of Minimum Cash Reserve Ratio of banks from 4.0% to 3.0% Introduction of special foreign currency line of credit The review of the automatic pricing mechanism for petroleum products to allow
Oct 2008
Macroeconomic and Modeling / Republic of Mauritius Ministry of Finance and Economic Empowerment1/19/2010 8
The review of the automatic pricing mechanism for petroleum products to allow consumers and businesses to realise quicker gains from falling prices
Dec 2008 Presentation of Additional Stimulus Package to shore up the economy by Dec 2008 g p y yappropriating and additional sum of MUR 10.4 bn [USD 346M], to
Fast track & front load existing public infrastructure projects Provide for investment in new projects Accelerate private sector investment Improve the business climate Build human resource capacity Support vulnerable sectors, such as
SME E t i t d & M f t i i d t i Export oriented & Manufacturing industries Tourism
Tax suspensions for at risk sectors such as Tourism ConstructionConstruction Freeport
Setting up special steering committees to expedite implementation of the stimulus package
Unlocking private investment
Macroeconomic and Modeling / Republic of Mauritius Ministry of Finance and Economic Empowerment1/19/2010 9
Reduction of Key Repo Rate by 150 basis point in Q4 2008 to 6.75% from 8.25% in September 2008
Procurement On the question of Procurement:Procurement q Raise ceiling for Ministries such that they can undertake their own procurement
ie, a partial decentralisation of procurement Improvement in the procurement process
Allowing Ministries to use Design and Build system of procurement Simplify standard bidding documents
eg, Relaxing the need to submit Bid Bond by introducing the Bid Security Declaration Form
CapacityBuilding
On the question of Capacity Building: A simplified process for the recruitment of experts/consultants to fill expertise gaps within Ministries/Departmentsp
The contract is for a period of 18 months to 36 months(with a 1month Min.) The process is rapid and swift and also adheres to sound principles of tendering Technically speaking, it is a recruitment via a tender process called procurement of services. Hence the expert/consultant can be
Macroeconomic and Modeling / Republic of Mauritius Ministry of Finance and Economic Empowerment1/19/2010 10
Qualified in any sector (economy, engineering, law, etc) Locals as well as Foreigners
Setting up of transitional mechanism to prevent job lossesJan 2009 Setting up of transitional mechanism to prevent job losses For viable enterprises, intervention through the MASMED fund –have a plan-(otherwise axed).
Jan 2009
Creation of the “Maurice sans Passeport” program To boost the Tourism sector, Mauritius is allowing French citizens to enter
Feb 2009g
without a passport between Feb 20, 2009 to Jun 1, 2009 Originally designed for the French who were unable to go to vacation in Guyana and Haiti due to the recent civil unrest
Reduction of Key Repo Rate by 100 basis points to 5.75% from 6.75%•Budget June 09: -Saving Jobs & Recovery Fund;
•Work cum Training-NEF
Mar-June 2009
Macroeconomic and Modeling / Republic of Mauritius Ministry of Finance and Economic Empowerment1/19/2010 11
-emphasis on infrastructure-LTA+RDC-cut in Ministers salary+ wage compensation only below Rs 12k-Redeployment scheme
ADVANCE CONTINGENCY PLANNING•ADVANCE CONTINGENCY PLANNING
For Mtius there is no option than rapid int’l integration - too small to have domestic consumption as driverMost important is advance contingency planning to prepare for the worst and to bring in measures before crisis hurts badly and forces instant (perhaps suboptimal) reactions.crisis hurts badly and forces instant (perhaps suboptimal) reactions.
If we face a temporary fall in international demand we need to finance the temporary downturn and a stimulus package based on
1 A l ti bli i f t t1. Accelerating public infrastructure,2. Removing bottlenecks to private investment3. Targeted support to viable enterprises to provide liquidity based on burden sharing led by Banks
(Mauritius approach);4. Technical assistance to SMEs to participate in the Mauritius Approachp p pp
Macroeconomic and Modeling / Republic of Mauritius Ministry of Finance and Economic Empowerment1/19/2010 12
ADDITIONAL FINANCINGADDITIONAL FINANCINGTo avoid unsustainable debt dynamics a path is required for controlling current spending and returning to the fiscal consolidation/debt reduction path after the crisis.
To pay for the above programme need additional financing from Development Partners incl new p y p g g pinstruments to support directly the restructuring
TRADE FINANCINGMay also need trade financing as international lines dry up
Need insurance policy with limited conditionality to finance additional measures under the contingency planning.
This may also be a good opportunity to push regional food security, development of renewable energy y g pp y p g y, p gyand lowering barriers to advance regional integration provided dedicated, additional and sustained resources are mobilised by Development partners.
Macroeconomic and Modeling / Republic of Mauritius Ministry of Finance and Economic Empowerment1/19/2010 13
A GLOBAL/REGIONAL APPROACH•A GLOBAL/REGIONAL APPROACH
•No more business as usual (the House is on fire);
•Rapid intervention by the international community;Rapid intervention by the international community;
•Eg Africa Restructuring Facility: aim is to save jobs + prepare for recovery
•Equity stakes in viable but vulnerable enterprises.
Macroeconomic and Modeling / Republic of Mauritius Ministry of Finance and Economic Empowerment1/19/2010 14
Macroeconomic and Modeling / Republic of Mauritius Ministry of Finance and Economic Empowerment1/19/2010 15