What if one could have seen beyond Vishnu Lutchmeenaraidoo’s euro-loan affair and take his wisdom out of it ?
By Balkrishna Kaunhye
01 August 2020
Around March 2008, I introduced in the financial news, which is broadcasted at around 8.20a.m during weekdays on Topfm, the price of gold when it was trading at around USD 900/oz. I thought that two items which need to be on the top of the mind of the people when listening to a flash financial news in a small market like Mauritius were Gold and Oil prices on the world market. Both commodities have got high influence and importance on the public purse. At that time, I was forecasting that gold will soon hit USD 1200-1300.The gold reserve of Mauritius at that time was a mere 2 tons.
Some months later Vishnu Lutchmeenaraidoo, (finance minister in the 80s of the economic boom era), who was then the chairperson of the commission on economy and finance of the MMM stated in October 2008 that the country should buy gold. “L’or est la valeur refuge1” he said. An opinion not shared by the then Minister of finance Rama Sitanen. At that time the governor of the Bank of Mauritius Rundheersing Bheenick, would not like to enter in political debates referring to the diverging opinion between the two,”Je préfère ne pas trop me mêler à ce débat de politiciens2” he said. He added that the BOM has diversified its reserves and 2 to 5% is in gold.
Following the controversies on gold, the reserves of the country which has remained stable around 2Tons since the year 2000 has doubled between 2008 to 2014. In December 2014 after the surprise win of l’alliance LePep, Vishnu Lutchmeenaraidoo was appointed as minister of finance. He brought back his friend and a past governor of the BOM, Mr Basant Roi at head of the Central Bank. It is said that the two collaborated closely when Vishnu was heading the Commission on Economy and Finance of the MMM. As a gold advocate it was without surprise that country’s gold reserves observed a rapid rise from 2014 to 2017 until both of them were no longer heading the two top most positions influencing the economy and finance of the island state. The Gold reserves which stood around 4 tons in 2014 spiked to some 12.4 tons by 2017. The policy of the Pravind Jugnauth as Prime Minister and Minister of finance and the new team heading the BOM seems not to have favoured gold and since he took office in 2017 the country’s gold reserve remained stagnant at 12.4 tons.
In fact, when the Euro loan affair cropped up costing Vishnu Lutchmeenaraidoo his position as minister of finance all the attention was driven towards the so called scandal and no one really bothered about questioning the fundamental behind the move of the minister of finance. For a reminder at that time, the minister of finance took a loan from the state-owned bank (SBM) where he was also a client, for an amount of EUR 1 million which he later explained that it was for his investment in gold. Beyond this pseudo scandal which did not hatch anything decision makers heading the country failed to grasp the bigger picture.
What if now we retrospectively put the question, why do you think a Minister of Finance who holds the pan of the country would raise a loan in Euro to buy gold? Two things were certain in Vishnu’s move. Firstly, the low interest rate on the Euro (low and more likely to go further down) and the refuge which gold offers. I still remember a conversation we had together Vishnu and I, some time back in 2012 about the 2008 world economic crisis. I was very much concern with the declining volume of exports and declining growth and I evoked a double cycle of 10 years which will take us beyond 2018 to recover.
At the time I started writing this opinion gold has rallied up to USD 1975/ounce and since then tested the peak above USD1980/ounce twice within the week ending Friday 31st July. Gold seems to be heading towards it’s all time high above USD 2000/oz sooner than later. This gives rise to another question, do we have the competencies around to know when to buy and when to sell ? The tragic history of Oil hedging at Air Mauritius and State Trading Corporation are clear examples that our decision makers have not learnt their lessons from these blunders.
Managing the finance of a country cannot be left in the hands of people who do not understand anything ablout macro-economics and the mechanics of different forces and factors in action. Hopefully, the 8 tons of gold added between 2015 and 2017 will serve the country in these hard times.
At least we should say ‘thank you’ to Vishnu Lutchmeenaraidoo who provoked an increase of the country gold reserves on two occasions. The first time in 2008 when the country’s gold reserve increased from 2 tons to 4 tons when the metal was
trading at USD 900-1000 /oz and again between 2015-17 from 4 Tons to 12.4 Tons when gold was trading between USD 1160-1200/oz.
However, what the wise man or our forefathers would say about selling of land and gold ? As once gone they are gone for ever. Here we are selling both !
I do not know when the Prime Minister and the Minister of Finance will finally understand that they are the wrong people at these positions. We cannot have at this level, short-sighted and unidimensional vision leaders. We can only pray that they do not bring the country to a state of no return before they are kicked out of power!
01 August 2020
Ref : 1 , 2 lexpress.mu of 24 octobre 2008.