Freebies vs. Fiscal Discipline: Resetting the Economic Compass for 2025 and Beyond

Opinion

By Jan Arden

Memos and proposals for the Pre-Budget 2025–2026 consultations, which were due by 21 March 2025 have, we assume, already been submitted to the Ministry of Finance. On the viva voce side, Junior Minister (Finance) Dhaneswar Damry, has continued the process by hearing out all stakeholders, in sessions which the PM helped kick off last Thursday. Setting the scene, Dr Navin Ramgoolam stressed the sombre situation the country and his government had inherited — “a massive public debt of Rs 644 billion, standing at more than 90% of our GDP, a budgetary deficit of 9.3%”, to which we may add a lack of new pillars to the economy and practically all State Owned Enterprises (SOEs) drained of resources, if not in dire straits (Air Mauritius, Metro, CEB, CWA, WWMA, STC, etc).

To compound matters, some of these SOEs or Departments have not even finalised or submitted their accounts and the Director of Audit’s Report for 2023-24, released last week, made further gloomy reading of annual gabegies and wastes that some of our civil servants and administrative processes seem to tolerate, as usual, without responsibility or accountability.

With a set of competencies at various poles of such an ailing crisis situation, including the likes of former Finance minister Rama Sithanen at Bank of Mauritius, Gilbert Gnany, economist Eric Ng, Dr Jyoti Jeetun at Economic development and planning and others, we trust the PM himself at the helm of the Finance portfolio has undisputably the resources to raise the patient out of the ICU ward into a more convalescent state. “We can no longer afford to live, play and spend lavishly with illusory printed monies or, much worse, forex debts, while shirking away from a society based on personal effort, meritocratic values, economic efficiency and social justice,” the PM pursued. We have here repeatedly condemned the “freebie” approach to political campaigning not to agree entirely.

Creative Freebies

India has unfortunately become a striking example of the “freebie” culture, with various regional and national parties offering free water, electricity, transport, lunch, stay-at-home allowances, and other such incentives. Many of these cannot be implemented anyway or rely on such heavy subsidies as to be utterly unsustainable. What was particularly irritating here in our own 2024 electoral run-up, was that the outgoing team had been in office for ten years and knew exactly what they had been busy hiding from us: a derelict economy with mismanagement at all floors, negligible resilience and mountainous debts to repay.

Of course, it is not always easy to draw a line between legitimate political policy pledges (say, free secondary education or free school transport) and what could be termed “freebies”, but having pondered over it, the Privy Council has handed us a guideline, which many may find wanting. Will the promised Fiscal Responsibility Bill help clarify while bringing an era of greater accountability and transparency in public procurement ?

Naturally, the population’s expectations of financial freebies that were promised during the 2024 campaign have been sobered after the State of the Economy’s blunt damning of the past regime’s legacy (which has gone largely unchallenged) and the weekly revelations of financial scams at various institutions, including the MIC (a BoM fully owned subsidiary). Moody’s ratings and the ongoing IMF consultations restrict the manoeuvring room of our finance teams, further constrained by the Trump-era tariff on our exports to the US.

A new way forward

Yet there may be some limited solace from some indicators that our financial specialists will be looking at carefully as they craft a new way forward. Among them, Trump’s shake-up has brought Brent crude oil trend and forecast lower (in 64-70$ price range from the 80-90$), meaning cheaper energy that may last some time. Secondly, the Chagos deal signature and first payment from UK Treasury, although some way off, could bring a much-needed Rs 10 billion or thereabouts to the 2025-26 budget. France’s presence at the Indian Ocean states summit in Madagascar with its accent on regional food security, could offer some prospects to our entrepreneurial spirit while recalibrating our own food security. For such things to make some inroad in the medium-term, we need a far more inventive spirit at the Food and Agricultural Research and Extension Institute (FAREI) and impress upon our universities and the Mauritius Research and Innovation Council the necessity to step out of their comfort zones.

It is possible that the “freebie” thrown out before the 2019 electoral campaign (tertiary education fully subsidised by the state) was not thought through as it may have turned our universities into glorified secondary schools, stultifying their necessity to aim for higher standards, greater consultancy, better equipment and better staffing. The measure costs the public exchequer some Rs 800m while forcing artisans, labourers and ordinary taxpayers and consumers to finance tertiary students most of whom have the means to pay. A comprehensive scholarship scheme would have better targeted families and students in real need without the downsides of an academia steeped in routine rather than breaking new grounds.

For instance, the Reduit campus could no longer be a thriving centre of excellence, attracting foreign students and visiting staff with modern labs and equipment. This potential could have been realized through a Public-Private Partnership to develop transport serving a residential campus facility at Reduit for at least 30% of its first-year intake.

The chantier, the tasks and the priorities are formidable but not overwhelming with political will and the right people at the right places. As of now, the new Minister of Tertiary Education, Science and Research, has not yet started his appointments to key posts nor publicly expressed his key policy orientations for “changement”” but it should be forthcoming anytime.

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The US-China Conflict and the Post-Globalisation Order

The US-China conflict has been brewing for some time now as the USA’s deep state* watched with growing disquiet the global power their own policies, ushered since the Reagan-Thatcher era of globalisation and trade liberalisation, had created. Once China entered the WTO, it rapidly became the world’s factory, using cheap labour to manufacture and export increasingly better quality goods to the large western markets and everywhere else for that matter. Its trade and industrial practices made for huge annual trade surpluses with Europe or the US and its reserves boomed. The US lost vast stretches of its industrial employment heartlands, particularly damning for its car and allied industries, as US industrialists delocalised to China while some delocalised nearer to Canada and Mexico.

Many US or Western financial think-tanks may have believed that the dragon would rein in the global ambitions of its political/military leadership (CCP). But once China’s economic clout was unlocked, President Xi had military and naval ambitions for supremacy and establish itself as the second global superpower. Advanced military assets like nuclear submarines, aircraft carriers, and fifth-generation fighters represent significant technological capabilities, allowing for the projection of influence in the region (including towards countries like India, Vietnam, and the Philippines) and for eyeball to eyeball confrontations with the US, for instance, in the South China Sea/Taiwan or in the Indian Ocean’s space.

The confrontation had to come at some stage, and some analysts believe that the Trump tariff war, despite a flurry of side distractions, is essentially designed to take down China’s economy and military a notch or two. President Trump and his wealthy backroom boys clearly won’t stand for US predominance to be challenged anymore. Trump’s tariffs have have hit China hard, while also impacting countries (Vietnam, South-East Asia) leveraged by China to bypass US customs: some estimates have China rerouting strategy to account for 50% more than official US direct trade deficit with China.

Where and how will the confrontation end? The US has the world’s largest consumer economy and is still an immense military power but cannot afford to ignore the threats posed by the dragon’s own ambitions. Its de-industrialisation is hurting its technological capacities and Trump is prepared to stare down the dragon now, rather than allow China’s further rise as a global superpower. It is assumed he would work with Taiwan, Japan and South Korea to bring cutting edge factories to the US.

True to form, Trump’s words reveal a deep-seated resentment towards globalists and left-liberals for creating the problem that he alone, according to his core beliefs, has the courage to confront. He views this as an absolute threat he will go to any lengths to tackle, with the other tariffs serving largely as a distraction, collateral damage concealing his true intentions, which Beijing must now have perceived. With both US Houses under Republican Party (GOP) control, a compliant supreme court and mid-terms still 18 months off, he knows no GOP or Dem leader, even if they had the same support, would even think of facing the dragon so brutally.

China’s options appear to be limited, its economy (including giants Alibaba, Temu and Tik-Tok) depends heavily on US consumers, and a tariff war is likely to be economically damaging. It could prevent some rare earth exports to the US, but its military, behind closed doors, may not be entirely happy with the current turn of events. In essence, while Xi Jinping holds significant power, the complex interplay of political, economic, and strategic factors can create an environment where differing opinions exist within the PLA.

The world is watching the two superpowers stare each other down as the momentous end of globalisation has already taken place, though its repercussions cannot yet be fully apprehended.

* The deep state conspiracy theory in the United States is an American political conspiracy theory that posits the existence of the deep state, a clandestine network of members of the federal government (especially within the FBI and CIA). The theory argues that there exist networks of collaborators within the leadership of the high-level financial and industrial entities, which exercise power alongside or within the elected United States government. (Wikipedia)

Mauritius Times ePaper Friday 11 April 2025