The rich literature of political economic history provides strong evidence of the existence of cycles conjoncturels électoraux in any democratic system. This implies that any rational Government would choose tough and unpopular measures during the first few years of its mandate (to effectively ensure implementation of its manifesto) but would then, at the end of the cycle, propose generous measures against the backdrop of forthcoming elections. Expecting Mauritius to depart from historical evidence clearly amounts to utopia.

Indeed, what we have witnessed is nothing but a classic case of an electoral cycle. To implement its economic agenda for the New Millennium, which called for public expenditures of gargantuan proportions in core sectors of the economy, Government chose to increase Value Added Tax (VAT) by a total of 50% over the first two years of its mandate. The additional revenue served to finance massive capital expenditures during the third year as well. These stand in stark contrast to the end of the electoral cycle where Government has chosen to ?reward? the population ?in many ways? for its ?sacrifices? during the past four years.

What was less classical though was the agility with which the minister of Finance managed to juggle with international commitments and l?échéance électorale. Indeed, the broad tariff reform, that has made the reward possible, was long overdue and had been subject to repeated criticisms from the International Monetary Fund and World Trade Organisation (WTO) in the past.

In 2001, for instance, WTO criticised Mauritius on its trade policies, including the ?average most-favoured-nation tariff rate, which was still high?. On the regional front, Mauritius has other commitments, especially as the Common Market for Eastern and Southern Africa Customs Union starts looming large on the calendar.

This would imply a Common External Tariff for all Member States that would inevitably call for reduced customs duties to a significant extent in the near future. By reforming tariff measures in 2005, Government has made a courageous attempt to meet its international obligations but, by the same token, has passed on the benefits to the population at large. D?une pierre, deux coups !

The economic assumptions that underlie the Budget 2005-06 look reasonably realistic. Government might be able to mitigate the important revenue shortfall following tariff reform through an expected drastic increase in consumer demand, namely by tourists. Given the number of luxury items that will soon become duty-free, tourists will find ?Destination Mauritius? even more attractive as a shopping paradise and would increase their spending during their stay (both in terms of quantity and value.)

Among some of the other interesting measures contained in the budget are the numerous opportunities offered to entrepreneurs to start a business. Apart from the Hydroponic Village that is expected to boost production of vegetables, small planters will benefit from free derocking facilities (200 arpents by 2006).

The unemployed will also have access to 100% finance through the Development Bank of Mauritius (DBM) Emerging Entrepreneur Loan Scheme. Other small entrepreneurs may borrow up to Rs 500 000 to modernise their small businesses. Incentives to establish market fairs and craft villages will be offered by the DBM. Those interested to operate in the seafood hub can have access to Rs 25 million to start a business.

From the more established business community perspective, however, it was a relatively quiet budget. The Information and Communication Technologies sector also has been kept waiting, except the e-government project. It would appear no bold incentives have been proposed to stimulate private sector investment in the short term.

All in all, the measures announced can be expected to bring a renewed dynamism within the economy. Entrepreneurs should seize the opportunities offered to increase their investments and modernise their businesses thereby creating more jobs.

Individuals of all ages and classes, on the other hand, are expected to increase their consumption of durable goods (notably through the increase in their personal disposable incomes), which according to one school of thought, might ultimately lead to a relance Keynesienne, and hence, in the words of the minister of Finance, lead ?this country anew on the path of sustained socio-economic progress?.