Africa-Press – Mauritius. Sameer Sharma is a Chartered Alternative Investment Analyst & Certified Financial Risk Manager and we have asked for his views regarding our macro-economic situation and related concerns, particularly with the Sri Lankan collapse in mind.
The independence, credibility and role of the BOM and its subsidiary MIC in handling our monetary reserves and currency depreciation comes under the scanner but so do the sustainability of our public debt situation and the pursuance of policies that are not up to the alarming situation of the country.
Nepotism and favouritism at all levels have compounded matters and our guest minces no words to slam the consequences at policy level or the resulting dismal perspectives for our youth.
Mauritius Times: Many local businessmen and traders one comes across with these days are of the view that they do not see how we shall be able to avoid going the Sri Lanka way; their worst fear is that in the wake of economic and financial chaos that, they think, is bound to ensue, it will be pretty bad on the social front.
Does this sound too alarmist an outlook? Sameer Sharma: We are not yet in such a sorry state. Mauritius is a much smaller country than Sri Lanka and benefits from large foreign exchange flows through the offshore banking system relative to the size of its economy.
It has a moderately better balance of payment situation than Sri Lanka and, given its size, it is an easier fix if we put the right people in the right places as soon as possible and also understand that we need to be more competitive and live within our means.
That said, like Sri Lanka, public debt in Mauritius is now above 100% of GDP, and its current account deficit of Mauritius is very high just like in Sri Lanka.
Both Sri Lanka and Mauritius have unsustainable public debt profiles and have had to resort to central bank financing of the fiscal deficit via what is known as helicopter money.
Both countries seem to have preferred central bank money printing vsengaging in meaningful wasteful spending cuts, better targeted fiscal support, proper private sector debt restructuring and asset sales and significant public sector structural reforms.
In the case of Mauritius, the central bank has increasingly resorted to off-balance sheet foreign borrowings which totalled more than Rs 35bn in December as per the latest external debt stock statistics.
Including these off- balance sheet liabilities would mean that, unlike in Sri Lanka, the net worth of the Bank of Mauritius is certainly already negative. The economic capital of the BOM was already very weak before these off-balance sheet adjustments relative to the risks it has to cover.
Our Finance Minister has also recently stated in Parliament that net international reserves when you exclude commercial bankforeign currency deposits held at the central bank and the increasing foreign borrowings by the Bank of Mauritius stand at a mere USD 4.1 billion vs the official gross amount of close USD 8 billion.
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