Rajesh Anandsing Acharuz Mauritius 2 June 2009 Republic of Mauritius Ministry of Finance and Economic Empowerent
Budget Balance (% of GDP) Percentage e of GDP 35 25 15 5-5 -15 33.2 14 10.4 2.2 2.6-0.2-1.8-4.2-2.7-1.1-3.9-2.1-4.8-3.4-3.7-6.8-5.1-3.6-7 -5.5-4 -3.9-3.5-4.1-4.1-7.2 Algeria Angola Egypt Libya -13.1 Mauritius Morocco Nigeria South Africa Tunisia Current Account Balance (% of GDP) Percentage of GD DP 48.3 45 32.6 35 25 22 15 6.6 7.6 8.1 1.6 2 0.7 2.9 5-5 -0.8-0.5-0.4-3.5-1.3-1.9-5.7-5.3-4.9-4.5-7.9-8.8-7.3-8 -15-10.2-10.4-11.7 Algeria Angola Egypt Libya Mauritius Morocco Nigeria South Africa Tunisia 2008 2009 2010 Country Forecasts: EIU Report Apr 2009 1/19/2010Macroeconomic and Modeling / 2
High Impact Factors Medium Impact Factors Low Impact Factors Fall of commodity Prices (Today v/s Peak in 2008) Oil prices (-70%) Base metal prices (Copper -70%; Nickel, -80%) Decline in volume of Global Trade Sharp decline in overall exports Diamond & Precious metal sales volumes have dropped Decline In Financial Flows Aid (ODA under pressure) Pledges to increase ODA doubtful Remittances Portfolio FDI Drop in worldwide Travel and Tourism Will negatively affect island nations the most Will also impact key destinations such as Egypt, Morocco, Kenya, South Africa, Botswana. Financial Industry Insolvency M t b k hi hl regulated and not involved in the CDS Markets Will ti l ff t i l d Most banks were highly 1/19/2010Macroeconomic and Modeling / 3
Real GDP Growth Rate [% %] 15.0 10.0 5.0 0.0-5.0 2.3 14.0 11.1 10.1 8.5 7.0 7.5 5.1 5.4 5.3 5.6 5.2 5.4 6.2 2.9 3.5 2.5 2.7 2.0 00 0.0 Overall Textiles Tourism Construction Financial services -4.4-10.0-7.5-8.8 Rate [%] 25.0 20.00 15.0 10.0 5.0-15.0-14.7 Savings and Investment Rates 24.3 25.1 24.5 24.5 21.2 21.4 19.6 20.3 19.7 17.4 17.11 16.7 16.6 14.7 15.1 Rs in Millions Foreign Direct Investment Rates 12000 1151411419 9000 7222 6000 2807 3000 0.0 Savings Total Investment Private Investment 0 FDI 2005 2006 2007 2008 2009 1/19/2010Macroeconomic and Modeling / 4
Budget Deficit (% of GDP) Public Debt (% of GDP) 0.0-1.0 Deficit 70.0 60.0 69.6 68.8 63.0 56.5 60.0 % of GDP -2.0-3.0-4.0-5.0-6.0-5.0-5.3-4.3-3.3-3.3 % of GDP 50.0 40.0 30.0 20.0 10.0 0.0 Debt Current Account Balance (% of GDP) Import Cover % of GDP 0-2 -4-6 -8-10 -6.4 CAB -7.2 Weeks [#] 45 30 15 31.4 34.7 37.7 35.5-12 -14-11.8-12.5-13.3 2005 2006 2007 2008 2009 0 Import Cover 1/19/2010Macroeconomic and Modeling / 5
High Impact Factors Medium Impact Factors Low Impact Factors Decline in volume of Global Trade Sharp decline in overall textile, finished goods and other exports. Sector expected to shrink in 2009 Drop in worldwide Travel and Tourism. Mauritius has already seen Reduction in arrivals Lower room occupancy rates which directly impact the airline and tourism sector Foreign Direct Investments Financial Industry The decrease in FDIs will Insolvency slow economic expansion and Banks are highly hl regulated new projects on the island and not involved in the CDS Markets Fall of commodity Prices Mauritius does not export commodities. Thus this Reduces cost of imports - positive impact instead of a negative one Reduction in Remittances Mauritians are not dependent on money from family working abroad for survival 1/19/2010Macroeconomic and Modeling / 6
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May 2008 The allocation of MUR 6.0 bn [USD 200M] for Airport expansion and modernisation The creation of 6 funds namely Manufacturing and Adjustment & SME Development Fund Maurice île Durable Fund Human Resources & Knowledge Fund Food Security Fund Local Infrastructure Fund Jun 2008 Oct 2008 The presentation of the Budget Full implementation of Report of the Pay Research Bureau on review of salaries and conditions of service in the civil service Injecting an additional MUR 1.5 bn [USD 50M] Appropriation of MUR 1.8 bn [USD 60M] as contingencies to support spending to increase demand Reduction in Cash Reserve Ratio from 5.0% to 4.5% Reduction of Minimum Cash Reserve Ratio of banks from 4.0% to 3.0% Introduction of special foreign currency line of credit The review of the automatic pricing mechanism for petroleum products to allow consumers and businesses to realise quicker gains from falling prices 1/19/2010Macroeconomic and Modeling / 8
Dec 2008 Presentation of Additional Stimulus Package to shore up the economy by appropriating and additional sum of MUR 10.4 bn [USD 346M], to Fast track & front load existing public infrastructure projects Provide for investment in new projects Accelerate private sector investment Improve the business climate Build human resource capacity Support vulnerable sectors, such as SME Export oriented & Manufacturing industries i Tourism Tax suspensions for at risk sectors such as Tourism Construction Freeport Setting up special steering committees to expedite implementation of the stimulus package Unlocking private investment Reduction of Key Repo Rate by 150 basis point in Q4 2008 to 6.75% from 8.25% in September 2008 1/19/2010Macroeconomic and Modeling / 9
Procurement On the question of Procurement: Raise ceiling for Ministries such that they can undertake their own procurement ie, a partial decentralisation of procurement Improvement in the procurement process Allowing Ministries to use Design and Build system of procurement Simplify standard bidding documents eg, Relaxing the need to submit Bid Bond by introducing the Bid Security Declaration Form Capacity Building On the question of Capacity Building: A simplified process for the recruitment of experts/consultants to fill expertise gaps within Ministries/Departments The contract is for a period of 18 months to 36 months(with a 1month Min.) The process is rapid and swift and also adheres to sound principles of tendering Technically speaking, it is a recruitment via a tender process called procurement of services. Hence the expert/consultant can be Qualified in any sector (economy, engineering, law, etc) Locals as well as Foreigners 1/19/2010Macroeconomic and Modeling / 10
Jan 2009 Setting up of transitional mechanism to prevent job losses For viable enterprises, intervention through the MASMED fund have a plan- (otherwise axed). Feb 2009 Creation of the Maurice sans Passeport program To boost the Tourism sector, Mauritius is allowing French citizens to enter without a passport between Feb 20, 2009 to Jun 1, 2009 Originally designed for the French who were unable to go to vacation in Guyana and Haiti due to the recent civil unrest Mar-June 2009 Reduction of Key Repo Rate by 100 basis points to 5.75% from 6.75% Budget June 09: -Saving Jobs & Recovery Fund; Work cum Training-NEF -emphasis on infrastructure-lta+rdc -cut in Ministers salary+ wage compensation only below Rs 12k -Redeployment scheme 1/19/2010Macroeconomic and Modeling / 11
ADVANCE CONTINGENCY PLANNING For Mtius there is no option than rapid int l integration - too small to have domestic consumption as driver Most important is advance contingency planning to prepare for the worst and to bring in measures before crisis hurts badly and forces instant (perhaps suboptimal) reactions. If we face a temporary fall in international demand we need to finance the temporary downturn and a stimulus package based on 1. Accelerating public infrastructure, t 2. Removing bottlenecks to private investment 3. Targeted support to viable enterprises to provide liquidity based on burden sharing led by Banks (Mauritius approach); 4. Technical assistance to SMEs to participate p in the Mauritius Approach 1/19/2010Macroeconomic and Modeling / 12
ADDITIONAL FINANCING To avoid unsustainable debt dynamics a path is required for controlling current spending and returning to the fiscal consolidation/debt reduction path after the crisis. To pay for the above programme need additional financing from Development Partners incl new instruments to support directly the restructuring TRADE FINANCING May also need trade financing as international lines dry up Need insurance policy with limited conditionality to finance additional measures under the contingency planning. This may also be a good opportunity to push regional food security, development of renewable energy and lowering barriers to advance regional integration provided dedicated, additional and sustained resources are mobilised by Development partners. 1/19/2010Macroeconomic and Modeling / 13
A A GLOBAL/REGIONAL APPROACH No more business as usual (the House is on fire); Rapid intervention by the international community; Eg Africa Restructuring Facility: aim is to save jobs + prepare for recovery Equity stakes in viable but vulnerable enterprises. 1/19/2010Macroeconomic and Modeling / 14
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