Budget: Duval Opt for Populist Measures or Economic Hardship?

Its flexibility: play on Tax weapon to boost consumption and meet the expectations of the people. Or get down to turn the tide with economic indicators are in the red. Minister Duval, who is presenting his third budget on Friday, November 8, said he was, however, himself aware that the growth of 3% 2 is difficult to sustain over time if the country wants to move to another level of its economic development. For the minister, and caution should be in order. Remains people's expectations. We now know which side has chosen Xavier-Luc Duval first answer to economic imperatives or will he yielded to the temptation electioneering?

For 2013, the Minister Duval announced that the budget deficit would be around 2.6% of GDP.However, if it exceeds 3%, the country runs the risk of being degraded by the international rating agency Moody's . With populist measures, which are typically associated with the pre-election year, this scenario could well occur. While at the beginning of the year, Moody's raised the rating of Mauritius in relation to the management of its debt.

Another concern is the growth. Minister Duval could aim lower taxes to boost growth.  "But there is a limit that the Minister of Finance can not cross, even if he wants some zero-called popular only to boost consumer items , "says Economist Eric Ng. This, due to the fact that the Minister has an obligation to find some Rs 75 billion in tax revenue to finance government spending, which in 2014 amounted to more than Rs 91.8 billion.

While the government may also intervene directly in the economy by injecting money into public works. In recent years, major public works projects, including the construction of the airport and the road network development, broadly supported growth. Except that many of these large projects coming to an end and their impact on economic activity and employment decreases significantly, even causing a slowdown in the construction sector.

But again, the ability to invest and spend the state depends on the fiscal situation, that is to say its ability to generate revenue - tax and others - and control their expenditure. And this is where the rub: the budget deficit, or the difference between cash in the coffers of the state and public spending is estimated at 3.5% against forecasts of 2% at baseline. Significant contraction of state revenues in the wake of the economic downturn will not achieve the initial estimates.

Outstanding disbursements following the deadly and devastating floods during the month of March and the application of the salary recommendations Errors, Omissions and Anomalies Committee Report of the Pay Research Bureau contributed to this performance-cons. Suddenly, a pronounced deficit puts pressure on public debt as the government must borrow to meet its obligations. Once again, there is a sword of Damocles over the upgrading of the rating ofgovernment bond by Moody's . Moreover, in the last edition of Focus MCB , the MCB said fear of the dangers of a change in trajectory of debt finance in fiscal space that can support growth terms and in terms of access to financial markets international.

Thus, extensive resources are not available for the public development projects. The state's fiscal constraints that push for greater spending restraint, albeit very vital for the country. And private investment is declining due to, among other things, a lack of visibility on growth prospects. This is the whole difficulty that faces the Grand treasurer.