rajesh anandsing acharuz mauritius 2 june...

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


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 [#

]


-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


family working abroad for survival

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


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


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


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


-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


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.


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.


rajesh anandsing acharuz mauritius 2 june...

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