Executive Summary 1.55 1.56 1.57 1.58 16 Another major challenge to economic governance is the management of parastatal enterprises. The government feels that these entities continue to play a regulatory role in the labour market and that they contribute to safeguarding social cohesion. However, it becomes a problem in a completely liberal economy where the private sector is the main driver of sustainable growth. The public sector debt (of Rs122.9 million) will always create risk because of the weight of the debt of parastatal enterprises (Rs31.5 million). The APR Panel recommends the following: (i) providing the government with a coherent macroeconomic framework that is based on economic projections and that is consistent with the political agenda; (ii) developing sectoral policies and operational programmes that clearly show priorities, sequencing and implications; (iii) promoting the effective participation of stakeholders, including trade unions and grassroots groups, in developing economic and social policies in order to promote a more responsible partnership for implementing and evaluating them; and (iv) reforming the parastatal enterprises sector. Promoting sound public financial management. The government has begun to reform the legal and institutional framework in order to: (i) improve efficiency and transparency in public finance; (ii) ensure that PBB is better coordinated from the time macroeconomic projections are made to the time the budget is prepared; and (iii) coordinate the implementation of the MTEF and PBB. However, Mauritius is still developing these tools in isolation, and the government should consolidate these reforms to ensure that there is effective articulation and overall coherence between these tools. The government adopted the MTEF in 2003 and PBB in 2006. This showed that the government apparently wanted to improve its capacity for managing and monitoring financial management. The government only implemented the MTEF in 2006. The Public Expenditure and Financial Accountability (PEFA) report emphasised that the 2005/2006 and 2006/2007 budgets did not reflect PBB, because the sectoral strategies were not yet in place. There are still considerable weaknesses in implementing the tools effectively. They include differences in how well the tools have been mastered, and the fact that the sector ministries do not have monitoring mechanisms. Furthermore, the MTEF and its related budgets should be based on economic policies that reflect the goals of the state at both macroeconomic and sectoral levels if they are to Executive Summary be efficient and effective. In addition, the programme budget is still prepared without considering the sector strategies. It therefore does not reflect sector costs. The quality of the MTEF and PBB suffers from an absence of modelling methods that help to tie the budget to the macroeconomic projections. 1.59 Mauritius began new and more rigorous reforms in 2006. They aimed particularly at increasing revenue and reducing current and extrabudgetary expenditure. They were directed mainly at: (i) fiscal and customs administration; (ii) debt management; (iii) public resource management; (iv) internal audits of accounting operations; (v) external control, which relies mainly on Parliament and the NAO; (vi) public sector procurement; and (vii) decentralisation. Institutional and methodological weaknesses reduce the efficiency and effectiveness of these reforms. Productivity and the efficiency of public spending remain concerns. 1.60 The APR Panel recommends the authorities to : (i) address these weaknesses in order to develop coherent macroeconomic and sectoral policies and strategies; (ii) prepare MTEFs and PBBs to promote credible budget management; (iii) review the accounting and internal control methodologies and manuals in order to adapt them to the requirements of PBB; (iv) reform parastatal enterprises quickly; (v) strengthen Parliament’s capacity to analyse and control the budget; and (vi) make public expenditure more productive. 1.61 Combating corruption and money laundering. There is no doubt that there are corruption and money laundering in Mauritius. However, opinions differ about the size of the problem and about how it is developing. The World Bank and Transparency International studies confirm it. The CRM learnt on several occasions that corruption is a serious problem in the country. Most stakeholders believe that corruption is particularly prevalent among ministers, politicians and high-level civil servants, and that it has trickled down to lower levels. The perception is widespread that ‘big fish’ and well-connected people are immune to prosecution. In addition to the Customs Department, the police and the National Transport Authority, stakeholders say that corruption is widespread when contracts are awarded under the capital budget through collusion between government officials, contractors and suppliers. 1.62 ICAC, the most important agency involved in the fight against corruption, publishes an annual report. The 2007/2008 report shows that the number 17