Q: Going back to your role as Finance Minister, how do you view the current crisis in Europe?
A: We are obviously living through very interesting times – the global financial crisis followed by the crisis in the Eurozone, all of which have an impact on Mauritius.
Nevertheless, my last budget in November went against the trend. We could have adopted safety measures, and we could have opted for high taxation.
Instead we purposely went against the trend and substantially reduced capital gains tax, tax on dividends, interest rates and quite a number of municipal taxes.
This has reduced the fiscal pressure in Mauritius. We are able to do this because we are maintaining a very tight expenditure policy, where our official deficit this year will not exceed 3.8%, where our government public sector debt will not exceed 54% and where we’ll only be borrowing for capital investments; we won’t be borrowing to pay salaries or for the recovery strategy.
The ratings agencies have been very positive in their reports on the budget and the economic performance of the country.
Nevertheless, the Eurozone crisis in particular has had an impact on us. There has been a fall in consumer confidence in Europe, with the result that there is not a lot of money to go around and so you have to fight harder to get your share of it.
This has also had a negative impact on the exports of our textiles because of the lower demand for goods generally. However, we hope that people will continue to want sugar – another important export for us.
The fall in the value of the euro could have been disastrous for our enterprises because it is difficult to sustain a 10% loss of income.
So these are the factors that we have to be very careful about. Not surprisingly, we are very keen to see a quick return to normality in Europe.
Q: How have you reacted to the crisis in the Eurozone?
A: We have reacted by creating the correct fiscal conditions and by increasing or maintaining the high level of capital expenditure by government. We are also responding by helping to create demand for our products and services, by putting additional resources into our promotion agencies and by raising the level of investment in enterprises. We know we have to fight harder for every pound, every euro, every dollar that comes in and we are doing that. We’re putting money aside for eventualities and we also have standby loan agreements should we need them.
Q: What has been the impact on economic growth?
A: Our growth should have been about 6% though we managed only 4.1% last year. We expect growth this year to be also around 4%. Unemployment is around 7.8% – which is better than the US.
Nevertheless, on a global scale, we coped extremely well and quite a few people are asking how we managed a 4% growth against 1% or 2% or negative growth in many countries.
The secret is that our sectors have performed well. There has been an 8% growth in sugar exports – especially to South Africa. Our ICT sector and the Integrated Resort Scheme picked up in the second half of the year.
Q: In the light of the Eurozone crisis, do you think Mauritius should be seeking more commercial alliances with non-traditional partners?
A: Whilst maintaining this model and giving all the importance to our European friends, we also have to obviously increase our presence, for example, in China, India and the Middle East for tourism and for investment; in South Africa and the Middle East for textiles and greater activity in Russia.
Obviously, we are aware of the changes in the world, but change takes time. As it is, we are hoping to substantially increase our access to China this year and establishing better terms of trade with them.
Africa is very much at the centre of our plans. Mauritius is an excellent point at which to base your organisation and from which to venture further into continental Africa.