Net foreign assets of the banking system increased for the third consecutive month, rising by Rs456 million or by 1.5 per cent, from Rs31,139 million at the end of June 2001 to Rs31,595 million at the end of July 2001. Net foreign assets of commercial banks maintained their upward trend, increasing by Rs645 million or by 7.5 per cent, from Rs8,577 million to Rs9,222 million. Net foreign assets of Bank of Mauritius dropped by Rs189 million or by 0.8 per cent, from Rs22,562 million to Rs22,373 million.

Domestic credit remained on an expansionary path, resulting mainly from the increase in commercial banks' credit to the private sector. It rose by Rs1,413 million or by 1.5 per cent, from Rs91,863 million at the end of June 2001 to Rs93,276 million at the end of July 2001.

Net credit to Government edged up by Rs58 million or by 0.3 per cent, from Rs17,579 million at the end of June 2001 to Rs17,637 million at the end of July 2001. Net credit to Government from commercial banks rose by Rs358 million or by 2.4 per cent, from Rs15,203 million to Rs15,561 million while net credit to Government from Bank of Mauritius went down by Rs300 million or by 12.6 per cent, from Rs2,376 million to Rs2,076 million.

Credit to the private sector from commercial banks increased by Rs1,368 million or by 1.9 per cent, from Rs73,719 million at the end of June 2001 to Rs75,087 million at the end of July 2001.

Money supply M2 increased by Rs1,324 million or by 1.4 per cent, from Rs97,126 million at the end of June 2001 to Rs98,450 million at the end of July 2001. Narrow money supply M1 rose by Rs101 million or by 0.8 per cent, from Rs12,384 million to Rs12,485 million. Quasi-money went up by Rs1,223 million or by 1.4 per cent, from Rs84,742 million to Rs85,965 million.

The level of reserve money fell by Rs430 million or by 3.8 per cent, from Rs11,343 million at the end of June 2001 to Rs10,913 million at the end of July 2001.

Taking into consideration liquidity conditions in the market, the Bank carried out in August 2001, for periods varying from 2 to 3 days, two repo transactions and one reverse repo transaction with commercial banks. The lowest yield accepted for the repo transactions was at 7.50 per cent while the highest yield accepted for the reverse repo transaction was at 6.00 per cent.

The number of transactions routed through the Mauritius Automated Clearing and Settlement System (MACSS) in August 2001 was 3,153, involving a total amount of Rs29,610 million, compared to 3,001 transactions for a total amount of Rs29,388 million in July 2001. The average number of transactions routed daily through the MACSS increased from 136 in July 2001 to 143 in August 2001. The average daily value of transactions also went up from Rs1,336 million in July 2001 to Rs1,346 million in August 2001.

Between end-June 2001 and end-July 2001, the number of Automated Teller Machines (ATMs) in operation in Mauritius increased by 3, from 234 to 237 and the number of cardholders (that is to say the number of cards in circulation) went up by 5,660 from 695,576 to 701,236.

The number of transactions involving the use of credit cards, debit cards, ATMs and Merchant Points of Sale increased from 1.579 million in June 2001 to 1.752 million in July 2001. The value of such transactions increased from Rs2,361 million to Rs2,654 million over that period.

Outstanding advances on credit cards rose from Rs636 million at the end of June 2001 to Rs653 million at the end of July 2001.

On the international foreign exchange market, during August 2001, the US dollar, on average, weakened against all major currencies as ongoing uncertainty about the faltering US economy, fuelled by the release of weak US economic data, prompted traders to sell the US currency. As widely expected, on 21 August 2001, the US Federal Reserve, at its FOMC meeting, for the seventh time this year, reduced its federal funds rate by a quarter percentage point to 3.50 per cent, its lowest level since March 1994. In its accompanying statement, the Federal Reserve, although citing contained inflation, gave no indication that the US economy had begun to recover from a year-long slowdown, thereby keeping the option for more easing open should the economy deteriorate further.

Against the backdrop of the US dollar’s broad-based weakness, the euro, which started the month trading around US$0.8802, made headway against the US currency pushing above the 90 cents dollar level, to close August 2001 at its intra-month high of US$0.9181. As expected, the ECB, at its governing council meeting on 30 August 2001, cut its benchmark minimum bid rate by 25 basis points to 4.25 per cent, citing slowing growth in Europe and the United States and easing inflationary pressures.

The Pound sterling, which started August 2001 trading at US$1.4277, eased to touch its intra-month low of US$1.4135 after the Bank of England, at its monthly MPC meeting, surprised the market by reducing its key repo rate by 25 basis points to 5.0 per cent. However, taking advantage of the broad-based selling of the US currency and the release of resilient UK economic data that dampened expectations of further rate cuts, the Pound sterling regained footing to close at a high of US$1.4586.

The Japanese yen firmed up against the US dollar, capitalising on the weakness of US currency. The upward movement of the yen was, however, limited by market caution about possible currency intervention by the Japanese monetary authorities.

Direct sales of foreign currencies by the Mauritius Sugar Syndicate (MSS) to the banking sector during August 2001 amounted to an equivalent of US$35.3 million. The Bank of Mauritius intervened on the interbank foreign exchange market selling a total amount of US$2.0 million in August 2001.

Reflecting international trends and local market conditions, the rupee, on average, depreciated between July 2001 and August 2001 against the US dollar, Pound sterling, Japanese yen and euro by 0.5 per cent, 2.0 per cent, 2.7 per cent and 4.9 per cent, respectively. During August 2001, the Mauritian rupee eased against the US dollar to trade at an average rate of Rs29.620 compared with an average rate of Rs29.482 in July 2001. The rupee went down against the Pound sterling to trade at an average rate of Rs42.534 in August 2001 as against an average rate of Rs41.700 in July 2001. The rupee also depreciated against the Japanese yen to trade at an average rate of Rs24.408 per 100 Yen in August 2001 compared with an average rate of Rs23.739 per 100 Yen in July 2001. Reflecting the euro’s recovery on the international foreign exchange markets, the rupee lost ground vis-à-vis the single currency to trade at an average rate of Rs26.666 in August 2001 compared with an average rate of Rs25.360 in July 2001.

On an average basis, between January 1999 and August 2001, the Thailand baht, Mauritian rupee, Korean won, Taiwan dollar, Singapore dollar, Indonesian rupiah and Hong Kong dollar appreciated against the euro by 4.8 per cent, 8.7 per cent, 17.7 per cent, 19.9 per cent, 22.7 per cent, 23.7 per cent and 27.8 per cent, respectively. The Philippines peso and the South African rand, however, depreciated vis-à-vis the euro by 4.9 per cent and 6.7 per cent, respectively.

The foreign exchange reserves of the Bank of Mauritius increased by Rs923 million, from Rs22,373 million at the end of July 2001 to Rs23,296 million at the end of August 2001.

The 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), increased by Rs465 million, from Rs31,666 million at the end of June 2001 to Rs32,131 million at the end of July 2001. The end-July 2001 level of net international reserves of the country represented 30.5 weeks of imports, up from 30.1 weeks at the end of June 2001.

Total resources of offshore banks went down by US$60 million or by 1.6 per cent, from US$3,788million at the end of June 2001 to US$3,728 million at the end of July 2001. The drop in total resources is mainly attributable to a reduction in borrowings by offshore banks.

Borrowings from banks decreased by US$48 million or by 2.9 per cent from US$ 1,650 million at the end of June 2001 to US$ 1,602 million at the end of July 2001. Non-bank deposits mobilised by offshore banks, however, went up by US$15 million, from US$1,635 million to US$1,650 million.

The total funds were mainly deployed by way of placements with banks abroad and loans and advances extended to residents and non-residents in Mauritius.

Offshore banks' cash in hand and placements with banks abroad dropped by US$74 million, from US$2,100 million at the end of June 2001 to US$2,026 million at the end of July 2001. Loans and advances extended by offshore banks registered an increase of US$18 million, from US$1,405 million to US$1,422 million.