By Azad JEETUN

The 2007/08 Budget conveys a number of important messages. This year?s budget has been widely welcomed with a sigh of relief since it did not contain the bitter pills as in 2006/07. On the contrary, it has provided a taste of sharing the harvest which has conditioned the mood of consumers, businessmen, taxpayers and vulnerable groups. But it should not be forgotten that we are in a transition period and the reform process has to continue since we are not at the end of the tunnel yet although we can see some gleam of light ahead. Hence the judicious advice that the road must be travelled all the way must be heeded. We cannot change horses in midstream.

The budget also comes at a time when a lot of debate has taken place on the role of the State in the economy, the democratization process, the lack of competition in the economy etc. The budget was thus an opportune moment to see whether the role that the State intended to play was to be redefined, whether ideology should predominate on economic imperatives. On this count, the budget does not make a U-turn. There is consistency in approach and an element of continuity. There is no change of course; the budget espouses the same philosophy as last year?s but does not go at length to restate it again; it focuses more on its implementation. It is not surprising to see the same emphasis as last year with either remedial or reinforcing measures whenever these are deemed necessary. For example, business facilitation processes remain a priority and further measures are announced to deal with strategic, developmental and administrative problems that constrain development of SMEs. Accelerated taxation reform is another case in point. The ultimate objective of the budget, like its predecessor, remains the attainment of global competitiveness which is the road to full employment and the improvement in the living standards of the whole nation. Mauritius has no choice but to open up to the world if it wants to speed up its recovery and growth. In this perspective, the five major fronts are revealing since they establish the priorities of the Minister of Finance and of the Government in the overall management of the economy.

1. Opening up the economy and facilitate business and innovation

2. Massive investment in public infrastructure,

3. Widening circle of opportunities linked to democratization,

4. Ensuring solidarity with the needy, and

5. Restoring order in public finances.

These priorities are in line with the reforms initiated last year. It also means that there should a priori be progress on the economic front to ensure that social objectives are taken care of. The latter depends on the former. We cannot distribute if we do not produce more, if we are not productive. Being a small economy, we have to open up to the world and our policies should ensure that we are competitive on the international scene. The country requires foreign investment, skills and competencies and flexible labour markets.

To be able to produce, investment is required especially in infrastructure so that there are no bottlenecks to development. The budget identifies the priorities in this field, traffic congestion, the port, the airport, utilities. However, these projects are quite selective since funds are limited and there is a major concern not to exacerbate the budget deficit and the debt burden. A degree of success has been achieved to contain both.

The budget does not deviate from the objectives of democratization of the economy. This remains a major preoccupation of the Government. It takes great care to ensure that the measures reflect this objective. There is an integrated approach to development and calls for inclusive growth across and within sectors. It takes pain to ensure that in each sector there is a niche for SMEs. As it states, ?Our overall objective is to have a broad-based economy.? The sectoral analysis shows that the economic landscape is changing fast with the emergence of new pillars and the right policies are required to sustain these industries.

Whether it is the sugar sector, the tourism industry, seafood or IRS the budget takes pain to include the development of small enterprises so that benefits flow down. Even parastatal bodies are invited to outsource some activities particularly to SMEs. This is another area where dependence on government funds can be reduced.

The Minister has not been insensitive to the wave of criticisms evoked after last year?s budget especially on the social front. The budget thus puts a lot of emphasis on the social aspect but it does not do so at the expense of the economic sectors. There is a targeted approach to ensure a judicious use of funds. Nobody is left out, women, youth, the disabled, pensioners etc. It refers to inclusive and job creating growth to achieve full employment and secure greater social justice.

The Minister has not been juggling with figures but rather with a mix of ideas to create a judicious balance. There is a balance between economic and social objectives, SMEs and larger businesses, a balance in sharing the fruits of development among the population, a balance in tax relief in terms of direct and indirect taxation. Economic growth has picked up to 5% in 2006, which is more than double the rate for 2005.

There is thus a balance in the budget which has sent many people off-balance. It is also balanced in tone thus sending the right signal to investors, business, politicians and the population alike. Economic and social policies are pragmatic and in line with the needs of the country .

There are already signs of progress in controlling spending, an early harvest from efforts to control spending. The budget deficit/GDP ratio has been contained to 4.3%. Recurrent revenue remains buoyant and is expected to increase by 13.5% in 2007/08 compared to 8.2% in this fiscal year. Recurrent expenditure growth is only half that of revenue growth.

The budget is however different in some respects. Last year?s budget referred to the need for sacrifice. This year it refers to rewards and efforts, to early harvest to share some of the early gains. The lesson for all mauritians is that there is no reward without sacrifice. This applies to the economy, to the individual and to the government alike. It is just the beginning and the momentum has to be sustained for the population to reap the benefits.

As was mentioned last year, ?? as the reform package delivers higher growth, the policies we put in place now will ensure that rising incomes would be shared more with the low-income workers, the unemployed and other disadvantaged groups that are making the biggest sacrifices.?

The budget sends a signal that other institutions are not immune from reforms or restructuring to improve their effectiveness. In this perspective, many parastatal bodies have to be reengineered to improve performance to be competitive and not dependent on public funds. This will have a salutary effect on public finances in the medium and long terms. In the debate surrounding fair competition, reference to the review of the role of STC is particularly relevant. This may constitute a litmus test as to the fairness of government endeavour for fair trade.

Much discussion has taken place on the statistics in the budget. But the budget is not only a mathematical exercise. One thing cannot be denied; the policies adopted have started to bear fruits. The Minister is on strong grounds on this subject in the light of success achieved so far and even the sceptics should be convinced. There is thus an incentive for him to press ahead with the whole gamut of reforms. The process should continue unabated and there should be no let up in our efforts to keep the economy on the right track, to boost productivity and improve competitiveness of the economy. The 2007/08 budget remains a cogent attempt to address the economic fundamentals of the day. In its successful implementation, it requires and relies on policy convergence, that is, a gamut of policies and actions that are initiated in the same direction and create a synergy and momentum for economic and social progress.