Overview

Net foreign assets of the banking system fell by Rs1,088 million or by 4.4 per cent, from Rs24,709 million at the end of June 2000 to Rs23,621 million at the end of July 2000. Net foreign assets of Bank of Mauritius dropped by Rs388 million or by 2.2 per cent, from Rs17,455 million to Rs17,067 million, due partly to the sale of foreign currency by intervention. Net foreign assets of commercial banks fell by Rs700 million or by 9.6 per cent, from Rs7,254 million to Rs6,554 million.

Domestic credit expanded by Rs1,353 million or by 1.6 per cent, from Rs86,456 million at the end of June 2000 to Rs87,809 million at the end of July 2000.

Net credit to Government rose by Rs203 million or by 1.1 per cent, from Rs18,466 million at the end of June 2000 to Rs18,669 million at the end of July 2000. Net credit to Government from Bank of Mauritius increased by Rs613 million or by 20.4 per cent, from Rs3,002 million to Rs3,615 million. Net credit to Government from commercial banks decreased by Rs410 million or by 2.7 per cent, from Rs15,464 million to Rs15,054 million.

Commercial banks' credit to the private sector went up by Rs1,164 million or by 1.7 per cent, from Rs67,271 million at the end of June 2000 to Rs68,435 million at the end of July 2000. Additional credit was extended by banks during the month under review to, amongst others, "Sugar Industry" (Rs450 million) and "Hotels" (Rs286 million).

Money supply M2 increased by Rs708 million or by 0.8 per cent, from Rs88,935 million at the end of June 2000 to Rs89,643 million at the end of July 2000. Narrow money supply, one of the components of M2, rose by Rs706 million or by 6.4 per cent, from Rs11,065 million to Rs11,771 million. Quasi-money, the other component of M2, was nearly unchanged at Rs77,872 million.

The level of reserve money went up by Rs454 million or by 4.7 per cent, from Rs9,766 million at the end of June 2000 to Rs10,220 million at the end of July 2000.

In August 2000, the Bank carried out four repo transactions with commercial banks. The repo period varied between 2 and 4 days and the repo rates ranged from 7.00 per cent to 7.50 per cent.

Between end June 1999 and end July 2000, the number of Automated Teller Machines (ATMs) in operation in Mauritius went up by 30, from 196 to 226 and the number of card holders (that is to say the number of cards in circulation) increased by 73,320 from 544,150 to 617,470. The number of transactions involving the use of credit cards, debit cards, ATMs and Merchant Points of Sale went up from 1.24 million in June 1999 to 1.53 million in July 2000. The value of such transactions increased from Rs1.8 billion to Rs2.2 billion over that period. Outstanding advances on credit cards went up from Rs452 million to Rs548 million.

On the international foreign exchange market, the US dollar, buoyed by strong and sustained buying orders, appreciated, on an average basis, against all the major currencies. As widely expected, the US Federal Reserve left the federal funds rate unchanged at 6.5 per cent at its FOMC meeting on 22 August 2000. The Federal Reserve warned, however, while stating that recent US economic data have indicated that the expansion of aggregate demand is moderating toward a pace closer to the rate of growth of the economy's potential to produce, that it might need to tighten credit later should inflationary pressures build up. The Bank of England at its Monetary Policy Committee meeting on 2-3 August also left UK base rates unchanged at 6.0 per cent. The Bank of Japan, however, for the first time in 10 years raised its overnight rate on 11 August 2000 by 0.25 percentage point. At its Governing Council meeting on 31 August 2000, the ECB hiked its key refinancing rate by 25 basis points to 4.50 per cent. With market sentiment becoming increasingly negative due to the credibility gap and growth differential between the euro zone and the US, the euro lost ground against the dollar. The single currency, which opened August 2000 at a high of US$0.9265 breached the 90 cents dollar level to attain a low of US$0.8926 at the end of the month. The Pound sterling, taking its cue mainly from the euro/dollar movement and undermined by ongoing expectations that UK interest rates have reached their peak, retreated vis-à-vis the dollar to close the month near a 7-year low of US$1.4519. The Japanese yen also maintained a weak tone against the dollar, although its decline lagged those of the euro and Pound sterling.

Direct sales of foreign currencies by the Mauritius Sugar Syndicate (MSS) to the banking sector during August 2000 amounted to an equivalent of US$33.2 million. The Bank of Mauritius intervened in the interbank foreign exchange market selling a total amount of US$16.9 million.

Reflecting international trends and local market conditions, the rupee, on average, depreciated between July 2000 and August 2000 against the US dollar and Japanese yen by 0.3 per cent and 0.2 per cent, respectively. It appreciated, however, vis-à-vis the euro and Pound sterling by 3.5 per cent and 1.0 per cent, respectively. The rupee eased against the US dollar, trading at an average of Rs26.402 in August 2000 as against an average rate of Rs26.320 in July 2000. The rupee also edged down vis-à-vis the Japanese yen to trade at an average rate of Rs24.512 per 100 Yen in August 2000 as against an average of Rs24.466 per 100 Yen in July 2000. The rupee gained ground vis-à-vis the Pound sterling to trade at an average rate of Rs39.301 in August 2000 compared with an average of Rs39.689 in July 2000. Reflecting its weakness on the international foreign exchange markets, the euro traded at an average rate of Rs23.933 in August 2000 as against an average rate of Rs24.761 in the preceding month.

On an average basis, between January 1999 and August 2000, the Philippines peso, Thailand baht, Mauritian rupee, Singapore dollar, Hong Kong dollar, Indonesian rupiah, Taiwan dollar and Korean won appreciated against the euro by 9.2 per cent, 14.5 per cent, 21.1 per cent, 24.9 per cent, 27.0 per cent, 30.7 per cent, 32.6 per cent and 34.6 per cent, respectively.

The foreign exchange reserves of the Bank of Mauritius decreased by Rs141 million, from Rs17,067 million at the end of July 2000 to Rs16,926 million at the end of August 2000.

Net international reserves of the country, made up of the net foreign assets of the banking system, the foreign assets of the Government and the country’s Reserve Position in the International Monetary Fund (IMF), decreased by Rs1,095 million, from Rs25,214 million at the end of June 2000 to Rs24,119 million at the end of July 2000. Based on the value of the import bill for the calendar year 1999, excluding the purchase of aircraft, the end-July 2000 level of net international reserves of the country represented 23.0 weeks of imports, down from 24.0 weeks at the end of June 2000.