Republic of Mauritius- Financial Support Plan of Rs 9 billion to mobilise funding from BOM, SIC and Consolidated Fund

The Minister of Finance, Economic Planning and Development, Dr Renganaden Padayachy, made this statement this morning in the National Assembly in reply to the Private Notice Question pertaining to the source and amount of financing in respect to the measures announced in the Financial Support Plan.

He further highlighted that out of the Rs 121 billion voted for the financial year Budget 2019-2020, Rs 40 billion is available until the end of the financial year as a response to the crisis and that in case the amount is not sufficient, Government will use the Estimates of Supplementary Expenditure (ESE), according to the provisions of the Constitution. A practice, he said, which has been used regularly in the past under different regimes.

He pointed out that an amount of Rs 208 million has been allocated for the expansion of the emergency plan in response to the contagion and Rs 450 million from the Workfare Programme will be used to support employees who find themselves in technical unemployment.

Minister Padayachy further stressed that with the spread of the Covid-19, the international economy is facing a financial instability and that no country will be spared from the crisis. Consequently, he added Government came up with the contingency plan to address the demand and supply effect on the economy at large adding that Mauritius can experience a negative impact of 1% to 6,5 % on its Gross Domestic Product. On the international front, he recalled that the Federal Reserve System has reduced the key rate to 0% in order to reassure economic players and the financial markets across the globe. Moreover, the OECD also forecasted a negative impact ranging from 0.5 to 1.5 percentage points of GDP on world growth, he added.

The funding of the measures enumerated in the Rs 9 billion Financial Support Plan, which cut across various economic sectors, will consist among others;

(i)           Bank of Mauritius, to deploy an amount of Rs 5 billion controlled by a technical committee for the allocation of funds through commercial banks at an interest rate of 2.5%, including a six-month moratorium on the repayment of capital and interest;

(ii)          the monetary authority of the BoM to reduce the cash reserve ratio from 9% to 8%, which will help free up funds of Rs 4.3 billion to be credited to a special account at the BoM to finance the various economic sectors affected;

(iii)         Launching of the 2020 Savings Bond by the BoM for individuals and non-profit non-governmental organisations. These bonds (Saving Bond) have an annual interest rate of 2.5% payable every six months with a maturity of two years and will be issued until the amount of Rs 5 billion is fully reached;

(iv)        Launch of the SIC Equity Participation Scheme to help businesses overcome their financial difficulties. An amount of Rs 2.7 billion will be mobilised through the issue of redeemable preference shares. Of this sum, an amount of Rs 2.3 billion will be allocated to the Equity Participation Scheme of the SIC, and a sum of Rs 400 million to the Investment Support Program;

(v)          Enterprise Modernisation Scheme, with a decrease in interest rate from 3.5% to 2.5%;

(vi)        Interest rate under the SME Factoring Scheme and under the LEMS to drop from 3.9% to 2.5%;

(vii)       SIC SME Equity Fund and the minimum rate of return required will be reduced from 6% to 3%;

(viii)      Creation of a Revolving Credit Fund of Rs 200 million at the Development Bank of Mauritius, to alleviate the cash flow problems of micro-enterprises whose turnover does not exceed Rs 10 million; this facility will be available until December 31, 2020. Advances under this facility will be interest free if repayments are made within nine months; and

(ix)        Companies affected by COVID-19 will be entitled to a double tax deduction on investments made in equipment (plant and machinery) for the period from March 1 to June 30, 2020. It is estimated that this measure will cost the State the sum of Rs 30 million.

As regards the tourism sector, Rs 250 million have been allocated for the following measures: Rs 60 million for the Passenger Fee on air tickets; Rs 50 million for 15% discount on all purchases at the Mauritius Duty Free Paradise at the airport and for the purchase of three litres of spirits; Rs 60 million for the suspension of 0.85% Environment Protection Fee from the turnover of hotels;  Rs 50 million for the Training Levy fee applicable to operators; and Rs 300 million for promotional fares by Air Mauritius.

Concerning the manufacturing sector, the suspension of port charges imposed by the Mauritius Ports Authority and the Cargo Handling Corporation Ltd for all exports will cost some Rs 200 million and Rs 50 million for the extension of the Freight Rebate Scheme on exports to South Africa and Tamatave. As for the extension of the Speed ​​to Market Scheme for exports to South Africa, Japan, Australia, Canada and the Middle East, this will amount to Rs 100 million.

In terms of agricultural production, a sum of Rs 100 million will be allocated to encourage local food production.