Curbing government spending has never been such a big issue in the Budget run-up, as it is this time. The deputy Prime minister and minister of Finance, Rama Sithanen, has little choice anyway as public finance moves dangerously towards a debt trap.

Rama Sithanen will be presenting the first budget of the Social Alliance government on 9th June. He is expected to deliver on reducing a ballooning budget deficit and on promoting private investment to create more jobs and growth in the economy. But he knows the harsh realities better than anyone else.

The country is facing multiple economic shocks, with the forthcoming substantial drop in sugar earnings, recession in garment manufacturing and the high prices of petrol on the world market. On top of that, the economy has been performing poorly on the fiscal front for several years now with expenditure largely exceeding revenues and government borrowings to plug the gaps reaching disquieting limits.

Budget deficit runs at 5% of Gross Domestic Product (GDP) and debt servicing represents 22.5% of recurrent budget, i.e. the largest item on the government spending list. With such resources going into repaying debts, there is inevitably a great strain on money available to spend on education, health, public infrastructure and policies that will help stimulate economic growth and reabsorb unemployment.

?Fiscal consolidation is one of our main priorities. A great share of public money goes into debt servicing. If we don?t take the necessary steps now, the deficit will reach 9% of GDP and debt servicing will rocket to 30 to 35% of recurrent spending. This is going to be an unbearable situation,? Rama Sithanen told l?express last week.

The Finance minister will have to find his way out against this very thorny backdrop. Basically, his plan is about collecting more receipts and cutting down on expenditure wherever possible to restore the fiscal balance in the coming years. Rama Sithanen is very serious about reducing wastage, inefficiencies and frauds in the public service. Poor financial management in ministries, government departments, para-statal and State companies accounts for a large share of the money badly spent.

Government is very keen on setting up systems that will ensure a better use of taxpayers? money. The next budget is being prepared accordingly. Hand-outs to ministries are subject to stricter controls.

The Finance minister has asked his fellow colleagues to reprioritise their spending plans and avoid for the time being projects that might put undue pressure on the exchequer. Ministries and other agencies will have to demonstrate that they have done their level best to cut down on all potential sources of funds mismanagement including projects overruns as well as unproductive and ineffective use of public assets when they submit their bids for the forthcoming Budget.

In short, the ministry of Finance wants civil servants to extract the maximum value of every single rupee contributed by the taxpayer. ?Public officers should realize that this money comes from taxpayers including poor people and middle-class families who pay income taxes and VAT,? said Minister Sithanen at the launching ceremony of audit committees in ministries last Thursday.

The audit committees are part of a wider initiative to control spending. They will also help reinforce the duty of accountability of officers in the management of public funds.

On the revenue side, there are high hopes on the Mauritius Revenue Authority (MRA) since the finance minister is ruling out tax increases. The coming into operation of the MRA will consolidate the collection of tax receipts and will come a long way to fix the many loopholes in the system whether at the customs, at the large taxpayers department or at the VAT bureau.

Sithanen is serious about reducing inefficiencies and frauds in the public service. Poor financial management accounts for a large share of the money badly spent.

But there is no more sustainable way to generate higher tax revenue than through vibrant economic activities. The budget will initiate measures to support a re-engineering of the economy expected to generate higher growth levels in the coming years. Government?s strategy is to restructure and consolidate existing industries such as sugar and textiles whilst developing new activities, products and services and new niche markets overseas.

The government is very serious about bringing more diversity and resilience to the growth engines. They are putting a great emphasis on attracting new investments, especially from abroad, in new industries with high-value addition strengths.

Information Technology, IT-enabled services like BPO and call centres, financial services, sea food hub, pharmaceuticals, medical research and an enlarged hospitality industry to include medical, business and shopping tourism are some of the areas that are expected to create more activities and jobs.