TABLE OF CONTENTS

INTRODUCTION

A budget is actually a formal plan which is normally prepared by the organization

for the achievement of the goals and objectives of the organisation and it forms part of
the overall strategic plan of the organization. Specifically it is a quantified plan of action
relating to a given period of time which is usually over a period of one year. Obviously
the organisation will not be able to achieve all its objectives or implement all of its ideas
within one year. That is why a budget requires preparation and a sound planning in order
to sort out priorities and set out the execution of the action plan in order of importance.

The role of Budgeting.

A budget is like a roadmap which indicates where the organization wants to go.
Consequently poor budgeting will lead the organization to failure whereas, a good and
efficient budgeting process will ensure that the organization does achieve its goals and
objectives. The budget document is also a mean of control in that at the end of the
budgeting period one can measure the degree of achievement against the goals and
objectives set. And this is true for all organisations whether public or private.

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 The function of budgeting was, under the traditional view of Financial
Administration budgeting, regarded as that part of government organization that deals
with the collection, preservation and distribution and use of public funds. It was
considered as a regulating mechanism for the proper arrangement of the flow of funds.
The participants of this traditional view are regarded as financial managers and they
discharge managerial functions of financial nature in an objective manner without any
relation to the vision and set of values of the political power.

Nowadays, this is no longer the case. Through a proper planning and allocation of
resources, Government can use the budgeting process to stimulate, regulate and control
the economic system prevailing in the country and financial managers have to take this
into account.

Indeed budgeting today has become a very important tool for government in
designing, planning, implementing and controlling its major objectives for the country.
The modern view of Financial Administration considers the budgeting process as an
integral part of the overall management process of an organization rather than one of
raising and distributing funds. The budgeting process includes the activities of all
individuals working in the organisation because any decision taken by them have direct
or indirect financial consequences.

The modern Financial Administration theory rejects the value-neutral stand of the
traditional theory which views financial administration as a distinct part of the
organisation.According to the new theory, which regroups three major theories such as
the Wagner and Pigou theory, the Keynasian theory and the activating theory, the
budgeting process has five basic roles to play and these are:-
1. The Participatory Role

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 2. The Equalising Role
3. The Functional Role
4. The Activating Role and
5. The Stabilising Role

The Participatory Role

The Participatory role of the budget is essentially an open and democratic process
of participation that enables ordinary citizens to deliberate and make decisions
collectively about budget allocations. The Participatory role is applicable at each step of
the budgeting process from, deliberation, planning, decision-making, and control. Each
one is important in itself, and is connected to each other.

The participatory role can therefore be classified in to two broad categories. One
is the pre budget participatory role which consists in the government engaging
discussions, consultations with the representatives of the society like the trade unions, the
NGO’s,the employer’s federation, the religious bodies and other groups in view of
getting a feedback of what the people really want to be done. It is in fact a way in
democratizing the budgeting process and to make maximum use of the different ideas and
projects put forward by the citizens.

The second category is in the executive process where the citizens are granted a
certain amount of money to be invested in the area of their choice. Here the participatory
budget goes beyond traditional consultation mechanisms which are often characterized by

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token participation. The Participatory budget becomes a real decision making body. It is
about ordinary citizens making real decisions about real monies, which are public
monies.

In Mauritius the participatory role is implemented at both levels of categories.

Before the presentation of the budget and during the preparation of the estimates, the
government will hold meetings with the members of the Trade unions, the Employer’s
federations and other group of the society in order to make sure that the budget does not
exclude legitimate needs of the citizens and also to listen to their complaints feedback on
the outcomes of the previous budget.

On the other hand the government is also committed to give the citizens through
their representatives the possibility to manage and take decisions in respect of the grant
given to them for a particular purpose. For example the grant given to private secondary
schools and the Secondary Schools owned by the religious bodies like the Roman
Catholic Education Authority. These institutions are autonomous institutions that have
their to some extent the possibility to use the grants given to the for the benefit of their
students. This role can be regarded as a service to society to ensure the upward movement
and as a source of the knowledge and expertise required for developing the economy.

Next we have the grants that are granted to the various NGOs like the NGO for
Anti-Smoking and Anti-Alcohol Campaign. Here we see that the NGO has come with a
particular idea and vision for the society and the government in order to encourage this
participatory approach is willing to invest money into the organization which in turn will
have the freedom to choose the way in which it will promote a free smoking society. We
see that the NGO has full flexibility to use the grant in the most effective way that it may
think.

Third but not last we have the grant granted to the various cultural centers that
have been set up to promote the different cultures as well the various speaking union for
the various languages that we have here in Mauritius. Here again we see that the

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Government does not mingle in the day to day running of these cultural centers and
speaking unions. Instead these cultural centers have full autonomy in the way they want
to run their centre. This is an explicit example of participatory role of the budgeting
process where Government just provide the money but the how to make use of it is left to
the citizens.

Equalising role

The equalizing role of the budgeting process is a way for government to reduce or
even to eradicate the inequalities of wealth between the have and the have not through
what is known as equalization transfers. There are various examples of equalization
measures in the budget. For example the taxation system is that can be described as an
effort to exempt the poor whereas instead it is an efficient tool to transfer money from the
rich and give them to the poor through the delivery of free services like education. A
specific example will be the ZEP schools. Also Government does ensure that the old age
people, widows and the disable persons.

There is also another way that we can view equalization. For example in order to
ensure that all regions of the country attain an equal level of development in terms of
infrastructure, government can make some equalization transfer towards local council to
enable it to catch up with other localities. It is a fact that not all the municipal councils or
district councils can derive the necessary revenues through local tax in order to finance
their expenses. This is where the government comes in with an equalisation grant so that
each and every citizen may enjoy an equal number of benefits.

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 There is also a third type of equalization which government around the world is
encouraged to promote and that is gender equality. In fact to address this issue we do
have in Mauritius a ministry created specially for the women cause. There is for example
a program in the budget called Women's Empowerment and Gender Mainstreaming
which has the objectives of empowering women so that they can manage on their own
and not become dependent on their spouse. At the same it is a way of encouraging them
to join the gender mainstream.

Functional Role

Normally an economy cannot operate on its own at all times in a perfect way and
without any disturbance and it requires some periodic adjustment to put it on tract again.
The necessary adjustment is usually fine tuned by government through the use of special
policy instruments. This is where the functional role of the budgeting process comes in.
The objective is to maintain high economic growth and full employment through a proper
and effective taxation system and the effective management of the public expenditure and
public debt.

One of the ways that government has intervened to save employment is through
the implementation of the stimulus package in May 2009 and which was extended up to
December 2010 so as to save jobs, protect people and prepare for the recovery of the
economy. In fact government has through the stimulus package give direct support to the
SMEs and large enterprises facing temporary difficulties.

In addition government has also maintained its commitment to invest in the public
infrastructure plan in order to boost up construction activities and create jobs through its
expansionary macroeconomic policies. Government has also supported micro, small,

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medium and large enterprises that were in difficulty; protected the vulnerable, the
unemployed and the retrenched workers; and prepared our country for the recovery.

The Development of Non-Sugar (Crop) Sector programme of the MINISTRY OF

AGRO INDUSTRY, FOOD PRODUCTION AND SECURITY is yet another field that
government is taking in order to help Mauritius move towards other productive activities
by providing incentives and facilities to the agricultural community and the public at
large. The recommendations of the blue print for sustainable and diversified agriculture
and of the three-year strategic food security programme are being implemented. Thirteen
schemes and projects have been approved for implementation, of which three have
already started, namely the Food Crop Insurance Scheme, the Seed Potato Purchase
.Scheme and the Onion Seed Purchase Scheme.

Activating Role
Government sometimes has to take actions in order to stimulate the economy by
investing in areas where the private sector is not willing to indulge or where the private
sector on its own does not have the capability or the means of embarking on a project that
requires massive investment or enormous preliminary research and development work.
Indeed in the modern perspective of financial management government is more and more
expected to play an activation role in the economy not in that it should run enterprises but
it should facilitate and encourage the flow of investment and its optimal allocation to
increase the volume of national income.

For instance in the 2010 National budget program the government is coming
forward with the The Land Based Oceanic Park which is a new emerging sector where
the private sector do have the knowhow nor the capabilities. This project in fact requires
massive resources in the research and development phase. It will initially host Green Data
Centres using Sea Water for Air-Conditioning. The park will also house downstream
activities such as aquaculture, water desalination and bottling, and pharmaceutical
products amongst others.

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 To further attract FDI and strengthen the traditional and new sectors, a number of
measures have been announced. The Government has announced the introduction of a
Law of Foundation to give the necessary boost to the Mauritius International Financial
Centre. In addition, relevant Mauritian authorities have been mandated to seek equivalent
jurisdiction with leading financial centers to expand the scope of the Mauritian financial
platform and to market its products globally.

Government is also committed to allow the ICT-BPO industry to surf the next
wave of value-addition and sustain its organic growth, the Government has announced a
‘Work from Home BPO Scheme’, an increase in bandwidth and reduction in the price of
telecom as well as a ‘Technopreneurship Programme’ which aims at providing support to
young graduates and entrepreneur in the technology sector to develop technology
products for the global market
Stabilising Role

Government also has a stabilizing role to play in the economy and one of the
declared objectives of the government is to achieve the stabilization of the price level and
keep the inflationary trend to reasonable level. This is achieved through the
implementation of a good fiscal and monetary policy.

The monetary policy is a process by which the central bank controls the supply of
money, the availability of money and the cost of money that is the rate of interest. The
objective of the monetary policy is to achieve growth and stability in the economy by
maintaining low or stable prices. If there is too much money on the market, it is more
likely that this will cause inflation and government will use a contractionary policy to
decrease the amount of money and it usually does so by raising the interest rate and
selling of bonds. On the other hand if there is a shortage of money on the market by
increasing the supply of money through buying bonds and lowering interest rate. In the
budget 2010 for example government has lowered the interest rate in the face of
weakening activity in an effort to return the economy to a low inflation path.

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 There are also some few fiscal policies like the reduction in custom duties in order
to counteract the imported inflationary trend. A fiscal policy is concerned with the
management of government expenditure and taxation. To stimulate the economy for
example the government has come up with projects to improve existing infrastructure and
create new ones. Indeed under the shaping recovery policy, government has provided for
the following measures:-
• Investing on the modernisation and ex-tension of the airport with the investment
of around Rs 10.6 billion in the new passenger terminal, Rs 2 billion in a new runway and
Rs 900 million for a new taxiway.
• Allocating Rs3.5 billion towards the modernisation and expansion of the
Mauritius Container Terminal berth and deepening of the seabed.

Conclusion

In the context of the modern economy it is clear that Government cannot stay in
passive mode and it has rightly chosen to play its role in order to boost up and bring the
economy to a new level by adopting strategies and plans in accordance with the five
different roles of the budgeting process discussed above.

Nowadays the budgeting process should not be restricted to purely accountable

exercise. Rather there should be some innovation in term of the equalising role to bring
about social justice, in term of the functional role so as to maintain high economic growth
and full employment. In addition the government has to play an active role as well as a
stabilizing role. However the most important aspect of the budgeting process is to ensure
a greater participatory role which is synonymous to greater democracy.

In addition to the few examples quoted in this document the 2010 National
Budget do contain all the elements of the five roles modern financial management it can
be safely said that Mauritius is on the right path in terms of the modernization of its main

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policy tool, that is the budget, in an effort to achieve economic development and a more
equitable sharing of the economic prosperity.

REFERENCES

The Budget 2010 Speech

The Programme-Based Budget Estimates 2010 & Indicative Estimates 2011 & 2012

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