You don’t look for a revolution in the last budget presented at the end of a government’s term. The whole purpose of such a budget is to spread the largesse evenly enough to position the government well for the coming election. However, this budget also contained a questionable measure: the government wants to dip into the reserves of the Bank of Mauritius (Rs18 billion according to the budget estimates) to help pay off its external debt and try to meet its own public debt targets.

Now there are plenty of economic reasons why a government should not dip into central bank funds to pay for its own largesse. And there is a moral hazard contained whenever a central bank – which is supposed to act as a regulator and at times, even differ, with the government of the day – acts as its piggy bank.

It’s no surprise that the government wants to resort to this accounting trick to make its public debt figures look good. The current government has become a past master at accounting tricks and fudging the numbers when it comes to public debt.  It got the State Bank of Mauritius to set up subsidiaries and special purpose vehicles to borrow money for its infrastructure spending. Why? The SBM’s debts are not counted as public debt and special purpose vehicles disguise debt as equity with the government paying for all of it without any of it appearing on the public debt ledger. Raiding the BoM’s cash to make the numbers look good is another step in that well-established tendency. It is also no surprise why the BoM is choosing to play along. Its current governor, Yandraduth Googoolye, made his bones by trying to frame his old boss, Rundheersing Bheenick, as part of the government’s offensive against the Labour Party and jumped into the Financial Services Commission to help Alvaro Sobrinho get his investment banking licence going after the old board refused to do so and resigned instead. The current management of the BoM is only too obliging to government diktat.

Of course, this is not the first time that the central bank has been used for political purposes. In 1995, when he was minister of finance, Rundheersing Bheenick was accused of transferring Rs700 million out of the government budget into the reserves of the central bank to make his predecessor, Rama Sithanen, look bad by inflating the budget deficit left behind by the previous government. The move helped sour relations between the ruling Labour and MMM further and cost Bheenick the Finance Ministry. He was replaced by Vasant Bunwaree. The difference was that back then money was being put into the central bank to make the government’s figures look worse than they really were. At present, the government is planning to take money out of the central bank to make its numbers look better than they really are. If the past is any indication, pressganging the BoM into politics in this way has seldom ended well. Now with the government wanting the BoM to help massage the public debt numbers and help pay for its continued profligacy by becoming its private ATM or piggy bank, this too will end up in tears.