Budget 2019-2020: A budget high on the social acceptability scale with an out of the box national debt reduction strategy (KPMG View)
The Prime Minister and Minister of Finance and Economic Development, Pravind Jugnauth presented on Monday 10th June the 2019-20 budget speech entitled "Embracing a brighter future together as a nation".
John Maynard Keynes said that "men love security and money more, and creation and construction less, as they get older". This famous quote incidentally resonates in the measures and the pre-election context of this budget speech. With a growth of 3.8% and subdued inflation at 1.5%, the Mauritian economy is currently faced with an ageing population, a high national debt ratio of 65% and is in need of real sector reconstruction and growth.
The outlook shows a budget deficit at 3.2% of GDP arrived at by a prudent coverage of social measures amidst the objective of making Mauritius an integrated platform for regional trade and investments. Furthermore, it also gives an indication of the country's preference for infrastructure and human development as a coalition of socialists would craft it.
Enabling pillars of growth and productive sectors
The product proposition of our key sectors such as Tourism and Financial Services will be enhanced by: the promotion of Marina developments boosted by an 8 year tax holiday; incentives to promote MICE events in Mauritius; access to the Gujarat IFC by the Global Business Operators from Mauritius; the setup of a regulatory framework for crowd funding and the possibility of post-study work for international students in innovative sectors. On the supply side, the development of REITs, e-commerce headquartering activities, along structural actions have been announced to promote the ease of doing business with emphasis on the integration of e-licensing and e-clearance mechanisms as part of the Fintech agenda. Furthermore, the creation of a Mid-Market Enterprise company category as well as an exchange for SMEs on the Stock Exchange of Mauritius were announced.
Incentives in favour of Agriculture include the extension of tax benefits for vehicle purchase, winter allowance for tea planters, duty free incentives towards the development of apiculture, and a guaranteed price of Rs25,000 per ton of Sugar for the first 60 tons. We welcome the measure to support the high-end pesticide-free rebranding of the tea industry which has potential given an increase in demand.
With the metro soon to be a reality, several budget announcements indicate the strong agenda for the upgrade of infrastructure at all levels. These include the intended extension of airport facilities to increase capacity for both passengers and aircrafts; new roads, sea port deepening; and a number of regional infrastructure works in the form of Port Louis Waterfront enhancements, a water dam, bus terminal modernisations, and a number of community projects.
Innovative inclusiveness and Human development
Social inclusiveness continues to remain high on the agenda in the fields of education, health and social security. Families on the social register will all have access to free broadband.
Enhancements to the current educational set-up are proposed in the form of special educational needs in state schools. The government is maintaining investment in social housing and has extended access to housing grants to a larger income group.
The older section of the population will also see positively the creation of Silver Bonds as an alternative and high yield retirement savings plan. The much anticipated hike in the old age pension did not quite materialise - the increase was "only" Rs500. However, the much needed reform of the national pension burden was postponed sine die.
This budget recognises the green economy and sets out several environment friendly measures namely the setting up of a national bio-mass framework as well as a 20MW waste to energy project and continued incentives to promote solar energy. The short term eco-friendly agenda includes a major national cleaning campaign with private sector stakeholders and duty rebates to reduce the cost ownership of electric vehicles.
In conclusion, this budget has certainly lived up to expectations in terms of a pre-election exercise. No stakeholders seem to have been left out. The exercise scores high on the social acceptability scale but also puts forward an out of the box debt reduction solution by way of the use of accumulated reserves of the Central Bank. This will no doubt become a subject of intense debate for some time...
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