Robin Hood?s mission was clear : ?Rob the rich and give to the poor?. Whilst the word ?rob? would be totally inappropriate in the case of Pravind Jugnauth, on the other hand there has indeed been a serious attempt towards bringing more equity in income distribution in Mauritius. Examples abound : no more Basic Retirement Pension to high income pensioners (earning more than Rs 20,000); personal income tax reform through the establishment of a progressive income tax (implying 59,000 individuals will pay less tax) ; more taxes on goods consumed by the wealthy (such as jacuzzis and campements); distribution of land to small planters (200 acres to be leased) and to the needy; and employee share ownership plan (for all classes of employees), among others.

Tough legislative and institutional reforms are also under way to improve efficiency, discourage wastage and, again, bring more equity within society. At least a dozen bills have been announced and several other acts are to be reviewed. The forthcoming Equality of opportunity bill is commendable. Perhaps the two most important reform measures announced that would foster discipline and efficiency in public finance are the Medium-term expenditure framework and the new debt management strategy, that, until now, has artificially inflated the level of public debt. A plethora of measures has also been announced to discourage tax evasion and fraud.

The trends regarding most of the macroeconomic fundamentals are either encouraging or expected to improve : fourth reduction in the budget deficit (now 5 %) ; low inflation rate (3.9 %) ; current account surplus for the fourth consecutive year ; more control on public debt ; tough measures to contain the unemployment phenomenon (by targeting the 70 % who don?t have the School Certificate and the 30 % who have not passed the CPE).

However, the unemployment problem might not be totally contained without a proper reform in the wage-determination mechanism. Most of the budgetary measures will aim at reducing skills mismatches in the medium and long run but the problem of the ?skill premium? has been left unanswered. A long-overdue reform is the centralized bargaining system that characterises wage-determination. The current system, as noted by the IMF, has led to a situation where the wage differential between the emerging sectors and the ?traditional?, less productive ones has remained low. This has created disincentives for skilled workers to invest in education while reducing demand for unskilled workers. The overall effect has been a dampening impact on labour demand growth.

It is highly recommended that Government embarks on a full-fledged reform process sooner rather than later. The trouble is that 2005 and 2006 are bound to be electoral years, implying that one could expect a move in this direction only by 2007, unless ?responsibility and commitment? remain the order of the day.

KPMG