During his interview on SBC on Wednesday evening, Minister of Finance Danny Faure had great difficulty explaining the rationale behind the recent changes in the exchange rates of the rupee with the major international currencies. In the process he displayed an embarrassing lack of understanding of economics, especially monetary economics.
Asked by Antoine Onezime, SBC’s head of news and current affairs, for his comment on the issue of devaluation of the rupee, Faure replied with the following profound statement, “My comment is that there has been a change in the exchange rate”. The response left Onezime gob-smacked just as the camera turned on him. When asked to explain the government’s new policy on the exchange rate Faure went on to explain why it was necessary to make the rupee more competitive. His explanation, however, reveals his poor knowledge of economics if not complete ignorance of the subject.
Faure said that in the past his Government favoured a policy of strong rupee. He did not say whether this policy was right or whether it achieved good things for the country. However, he said, today the world is changing and we in
Faure did reveal, however, that the government was contemplating some serious structural adjustments with outside help. He revealed that he would be creating a department of the Treasury within his ministry to control public spending. This would be a welcome return to the past when there was Treasury which was under the charge of a qualified professional accountant whose title was accountant general. The accountant general was responsible to ensure that all government expenditures were kept within the authorised budget limits. After the coup d’etat in June 1977, the post of accountant general was eliminated, while ministers could authorise any expenditure regardless whether it had been approved by parliament.
Faure also said that, henceforth, the Ministry of Finance would take into account the comments made by the Auditor General’s report on government expenditure. This tacit admission that the report of the Auditor General was always ignored by the Government must be a welcomed relief to the Opposition in the National Assembly where the Public Accounts Committee oversees public expenditure and has the mandate to review the Auditor General’s report in public. In all the democratic countries of the Commonwealth, the chairperson of the Public Accounts Committee is always a member of the opposition. This is done in the sprit of public accountability. In
The interview revealed a different demeanour by the Finance Minister than the one he portrayed during his maiden budget speech in December 2006. Then he was full of promise and confidence. Not only did government raise substantial revenues in 2006, Faure also proudly stated that it had spent more than the previous year even more than it budgeted for. In his maiden budget speech he claimed “The targeted expenditure was SR1.75 billion whilst we expect to complete the year with an expenditure of SR2.13 billion, an excess of SR376 million or 21% above the budgeted amount”. That was a violation of the Constitution but Faure could not care less.
The year 2006 had also been the presidential election year. As the year started, President Michel, who was the official SPPF nominated candidate, as well as the Minister of Finance, ordered that 600 carers working with the elderly henceforth be employed on a full time basis as government employees. Between 2005 and 2006, the number of full time government employees increased from 10,095 to 13, 472 an increase of 2,758 employers. Since the year 2007 started to 31 March, the number of government employees increased by another 699 personnel. But, the issue as to why suddenly so many people were being sacked from their government jobs was conveniently ignored in the interview. So far none of the carers have been sacked.
As Minister of Finance, Faure has an eye not just for how his Ministry functions, but how the economy as a whole functions. He admits that the monetary issues are the preserve of the Central Bank, which he claimed was independent. Faure, however, must tell the Central Bank governor where he thinks the former is going wrong, such as the creeping devaluation of the rupee without measures to limit the money supply. This, as Faure must have noticed, is causing the black market rates of currency exchanges to continue to increase rather than decrease or even stabilise. The effect is making a bad situation worse.
In the interview, Faure also got himself entangled in the so-called basket of currencies, which supposedly determines the exchange rate of the rupee. He said that previously there were many foreign currencies in the basket and now there are only a few. According to him, that is why the exchange rate of the rupee has depreciated. If you believe that, you will believe anything. Does that explain why Faure could not comment intelligently on the issue of why the Central Bank had adopted its current policy of creeping exchange rate depreciation of the rupee?
That probably explains also why Danny Faure is not suited to be the Minister of Finance at this difficult time.