Touria Prayag's Blog

L’Express Weekly, 16 September 2011

Posted in Uncategorized by touriaprayag on February 27, 2012

The louder voices

The Bank of Mauritius ( BoM)’ s decision to have the minutes of the Monetary Policy Committee ( MPC) meetings published along with the individual votes of its members is highly commendable and goes a long way towards ensuring transparency. It is no secret to anyone that on the MPC, there are members with clear vested interests; interests which have in the past been highlighted and have also been the object of parliamentary questions.

Two ministers of fi nance later, these members are still sitting cosy in the same place, confi dent that, for some inexplicable reason, they are untouchable. The confl ict of interest may have an important bearing on some major decisions taken by the MPC which, as a result, seems to be shy to take the very bold decisions required in hard times like these, where the biggest threat to our economy seems to be infl ation.

So, when people vote against raising the Key Repo rate, for example, it is important for the public to know who they are and where they are coming from. After all, this is common practice in developed economies and seems to be the tendency even in developing countries.

But the fate of the Key Repo rate is not decided only inside the MPC. It is highly infl uenced, one might be legitimate to think, by the economic operators who have, for years, been painting a picture of doom and gloom. The world economic recession has given them reason to raise their voices and we have, since, heard nothing else: Foreign Direct Investment is low, the textile situation is bad and tourism is worse. And the threat of laying off workers is brandished to instill fear in everyone.

The fi gures released by the BoM do not call for any pessimism whatsoever. Our exports have gone up by 1.3%. Unemployment is stable at 8%. Of course, behind every unemployed person, there is a family tragedy the country wants to avoid at all costs but pessimism has never solved any problems. Tourism is, in spite of repeated claims to the contrary, not doing too badly. Our arrivals are more or less the same.

Some of these tourists go to fi ve- star hotels on all- inclusive packages where they are force- fed fi ve times a day. Others choose smaller hotels or bungalows. They do not contribute to the economy any less. In fact, they contribute to small businesses in a much more important way.

The doom and gloom situation and the noise made around it have put the BoM on the back foot. So, today, we are no longer talking about increasing the Key Repo rate. The debate, largely infl uenced by the noise made by the same sectors, is about whether to decrease it or keep the status quo. We seem to have forgotten that, not long ago, the Key Repo rate was decreased by a whopping 100 basic points in one fell swoop! The fi gures released this week show that no employment was created as a result and our exports did not go up substantially. The only thing which went up, in fact, was infl ation. It is time therefore that the BoM moved to the offensive to keep infl ation in check. From their airconditioned limousines, some exporters probably cannot see how the tidimoun are struggling with the prices of basic commodities. Deafened by the noise of their own mantras, they cannot hear such distress. But they could at least begin to pretend that they are concerned about the interests of the whole country and not just extending their own empires!

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