Africa-Press – Mauritius. The implementation of the wage adjustment will amount to Rs 4.3 billion, or almost 1% of our budget deficit. Pravind Jugnauth, however, assured that taking out a loan to finance the wage increase is out of the question at his press conference yesterday.
But economists fear double-digit inflation by the end of the year. Like previous reports, the economic impact of the 2021 edition raised eyebrows among economists and financial specialists.
In question, the financial cost of its application and the risks that it will skyrocket prices with inflationary trends already perceptible in the country.
Rs 4.3 billion is what it will cost the public treasury each year to readjust the salaries of 85,000 civil servants and employees of parastatal bodies.
Should we borrow to finance its implementation? Prime Minister Pravind Jugnauth already brushed aside the possibility yesterday at his press conference.
He insisted that as the former finance minister and now the country’s top post, he never favored this option, which is to go into debt to finance the government’s current spending.
He added in the process, that the modalities have been worked on by the Ministry of Finance. Suddenly, the question remains: how to finance the PRB. At the Ministry of Finance, it is readily emphasized that Rs 4.3 billion will be taken from a reallocation of the development budget not used due to the advent of the Covid.
Or special off-budget funds, more specifically the National Resilience Fund which, at the end of the fiscal year ending June 30, amounted to Rs 12.8 billion and which, according to official estimates, will be at Rs 2.7 billion in June 2022.
Moreover, a careful reading of the Special & Other Extra-Budgetary Funds, indicates an amount of Rs 35.3 billion in June and Rs 19.7 billion for the same period next year.
“Reallocation of funds has always existed. It’s a dynamic process, ”hints at the minister’s entourage.
The only problem, however, is the transfer of the development budget or other special funds to finance the government’s current expenditure. The economists interviewed are not in favor of this practice.
“Will the government draw Rs 4.3 billion from special funds instead of the Consolidated Fund to finance the manna of civil servants?”, They ask.
However, the sum of Rs 4.8 billion will be added to the Rs 32 billion needed almost every year to finance the payroll of state employees. A situation that could negatively impact the budget deficit estimated at 5% of GDP by June 2022.
“Understand that Rs 4.3 billion is almost 1% of GDP. We need almost 1% more of our budget deficit, or almost 6% at the end of the next fiscal year.
However, since the funding comes from an already established fund operating outside the budget, it is very likely that it will not have a direct effect on the deficit as it does on the public debt. This is the trick generally used to make window dressing, “insists an economist who wished to remain anonymous.
On the other hand, with the mass of money in circulation by the end of the year, mainly coming from the lump sum disbursed in November to civil servants combined with the new salary scales for December and the end-of-year bonus, the risks of double-digit inflation is real.
Statistics Mauritius put year-to-year inflation at 5.4% last September compared to 2.6% for the corresponding period last year. And this week, the International Monetary Fund hit the nail on the head, projecting a rate of 6.6% next year.
Enough to challenge the leaders of the country with important challenges to manage even as officials are already dancing to the sound of hard currency. And what about the private sector?
