The Mauritius Finance Budget 2021-22 Speech was delivered by the Minister of Finance, Dr Renganaden Padayachy, on the 11th of June 2021 – This budget provides for the vision of the Government in as far as balancing social spending and commitments against collection of revenues, invigorating the economy and the preservation of public wealth under the on-going effects of COVID-19 on the economy: as a whole the proposed plan provides the a large fiscal stimulus to support Mauritian economy through the shock and impact of the global pandemic.
The Minister devised a new plan of action to boost the pace of recovery and build flexibility to support continuous growth opportunities, formulated upon three main pillars:
1 – Giving an exceptional boost to investment
2 – Shaping a new economic architecture
3 – Restoring confidence
In terms of measures to encourage investment in the economy, the Government is proposing a major reform to enhance the business environment by the implementation of a Regulatory Impact Assessment Bill. Several incentive schemes will also be reviewed and applied by the Economic Development Board (EDB). An Insolvency Bill will also be introduced to safeguard businesses amid the Covid-19 pandemic.
Tackling the matter of future prospects for Mauritian businesses, it has been pointed out that new opportunities will derived from four trade agreements coming into operation this year, namely the Comprehensive Economic Cooperation and Partnership Agreement (CECPA) with India, the Free Trade Agreement with China, the United Kingdom (UK) – Eastern Southern Africa (ESA) Economic Partnership Agreement (EPA) and the African Continental Free Trade Area Agreement.
The Budget also contains a number of initiatives to re-open Mauritius to the world, starting with the re-opening of the borders to tourists as from 15 July 2021 as a key measure to stimulate economic recovery. The business community was indeed pleased to hear the various measures to attract foreign investors and talents through the occupation permit system, improvements of the ease of doing business and tax incentives for certain sectors.
What to Expect?
The country’s economic indicators are in the red and the overall performance level is worse than expected; figures and analytics reveal that the GDP, in 2020 contracted by 14.9% against an initial forecast of 7%, the island’s debt to GDP rocketed to 95%, whilst unemployment was contained with a minimal increase to 9.2% (March 2021). The Government focused on job security to better contain unemployment but GDP took a hit and deteriorated more than planned. The effects of the extended lockdowns as well as border closure meant bigger slumps for the country.
COVID-19 has costed a lot to governments with oversized roles to relieve impacts of the pandemic and, with a larger public service, it will be harder to recalibrate the economy. The Budget projects a 5% budget shortfall and this would be an achievement in the current situation. With rising tax rates around the world, in its quest to boost investment, the government has been wise not to increase taxation in Mauritius, especially in the face of the “Global Minimum Tax” being issued in other economies. Yet, despite the several improved incentives and tax holiday granted to corporates and individuals, the MRA now finds itself with broaden powers to raise time barred appraisals in cases of tax fraud. While this initiative has been set to track down tax evaders, there should be a clear framework for the MRA to exercise such powers.
The current state of emergency uncovered vulnerabilities in our public institutions, insufficient responsibility and a need for more private sector commitment. Unfortunately, there is little in the proposed Budget which aims to adapt the role of government for a post COVID-19 era in improving efficiency, productivity and capacity building. With a limited budget at hand, should the priority not be on initiatives to reduce wastage? – now may be the right time to put aside a more inclusive society (sports complexes or community centres) and redirect this investment in sectors of need.
While the Budget comes with promising advances to rebuild the economy, now should be the right time to rethink strategies towards more “economic” objectives – in a present situation where the country’s indebtedness is rising, the government may start to accept the fact that is it the right time “to do more with less” and redirect its focus towards other sectors rather than infrastructure ends mainly.