Net foreign assets of the banking system fell by Rs129 million, from Rs21,543 million at the end of April 1999 to Rs21,414 million at the end of May 1999 or by 0.6 per cent, lower than the decline of 2.4 per cent registered between March and April 1999. Net foreign assets of Bank of Mauritius dropped by Rs284 million or by 1.8 per cent to Rs15,082 million at the end of May 1999 while those of commercial banks increased by Rs154 million or by 2.5 per cent to Rs6,332 million, thus maintaining the ascending trend noted since March 1999.

Total domestic credit expanded by Rs1,465 million from Rs75,313 million at the end of April 1999 to Rs76,778 million at the end of May 1999 or by 1.9 per cent, up from the increase of 0.5 per cent recorded between March and April 1999.

Net credit to Government from the banking system rose by Rs120 million, from Rs16,815 million at the end of April 1999 to Rs16,935 million at the end of May 1999 or by 0.7 per cent, as against a rise of 1.8 per cent between March and April 1999. Net credit to Government from the Bank of Mauritius declined by Rs164 million or by 3.9 per cent to Rs4,069 million at the end of May 1999, as compared to a rise of 15.8 per cent in April 1999. Net credit to Government from commercial banks increased by Rs284 million or by 2.3 per cent to Rs12,866 million in contrast to the fall of 2.2 per cent recorded in the preceding month.

Credit to the private sector from commercial banks went up by Rs1,372 million, from Rs57,878 million at the end of April 1999 to Rs59,250 million at the end of May 1999 or by 2.4 per cent, way above the increase of 0.1 per cent registered between March and April 1999. The increase in credit was directed mainly to "Sugar Industry" (Rs469 million), "Investments in tax-free debentures" (Rs348 million), "Manufacturing" (Rs170 million), "Personal & Professional" (Rs120 million), "Traders" (Rs113 million), "Housing" (Rs96 million) and "Hotels" (Rs70 million).

Money supply M2 went up by Rs504 million, from Rs78,486 million at the end of April 1999 to Rs78,990 million at the end of May 1999 or by 0.6 per cent, slightly lower than the rise of 0.9 per cent recorded between March and April 1999. Quasi-money increased by Rs556 million or by 0.8 per cent to Rs68,256 million whereas narrow money M1 dropped by Rs53 million or by 0.5 per cent to Rs10,734 million.

Reserve money went down by Rs585 million or by 6.0 per cent, from Rs9,793 million at the end of April 1999 to Rs9,208 million at the end of May 1999, as against a rise of 2.6 per cent recorded in April 1999.

On the international foreign exchange market, the US dollar appreciated against the Euro and Pound sterling but weakened vis-à-vis the Japanese yen during June 1999. The Euro dipped below its previous record low level of US$1.0417 attained in May 1999 to reach a new trough of US$1.0290 on the New York market. Bearish sentiment for the single currency still prevailed amid prospects for sluggish growth in the euro zone. The Pound sterling also weakened against the US dollar, to reach a 21-month low of US$1.5739 towards the end of June 1999. At its June 1999 Monetary Policy Committee meeting, the Bank of England, for the seventh time since October 1998, reduced its base rate by 25 basis points to 5.0 per cent, its lowest level since November 1997. The Pound sterling came under pressure after the release of the June 1999 minutes of the Bank of England's Monetary Policy Committee meeting which suggested that UK interest rates had not yet bottomed out. In spite of intervention by the Bank of Japan to prevent a premature rise in the yen, the Japanese currency gained ground against the US dollar amid growing optimism in economic recovery in Japan. In line with market expectations, the Federal Open Market Committee (FOMC), at the end of June 1999, raised its key short-term interest rate by a quarter percentage point, from 4.75 per cent to 5.0 per cent. However, the Federal Reserve also dropped its tightening bias, announced at the May 1999 FOMC meeting, and instead was adopting a neutral stance.

The Bank of Mauritius sold through intervention on the interbank foreign exchange market an amount of US$12.9 million to commercial banks in June 1999. Direct sales of foreign currencies by the Mauritius Sugar Syndicate (MSS) to the banking sector, mainly in Euros, amounted to an equivalent of US$17.1 million during the same month.

Reflecting international trends and local market conditions, the rupee, on an average basis, depreciated between May 1999 and June 1999 against the Japanese yen and US dollar by 1.2 per cent and 0.4 per cent, respectively, but appreciated vis-à-vis the Euro and Pound sterling by 2.0 per cent and 0.8 per cent, respectively. The rupee, which traded at an average rate of Rs20.811 per 100 yen in May 1999 reached Rs21.062 per 100 yen in June 1999. Against the US dollar, the rupee moved in a narrow range, trading at an average rate of Rs25.375 in June 1999 from Rs25.286 in May 1999. The rupee maintained its upward movement against the Euro, trading at an average rate of Rs26.360 in June 1999 compared to an average rate of Rs26.899 in the previous month. Against the Pound sterling, the rupee traded at an average rate of Rs40.471 in June 1999 compared to an average rate of Rs40.796 in May 1999.

The foreign exchange reserves of the Bank of Mauritius increased by Rs233 million from Rs15,082 million at the end of May 1999 to Rs15,315 million at the end of June 1999.

Net international reserves of the country, made up of the net foreign assets of the banking system, foreign assets of the Government and the country’s Reserve Position in the International Monetary Fund (IMF) decreased by Rs130 million, from Rs22,035 million at the end of April 1999 to Rs21,905 million at the end of May 1999. Based on the value of the import bill for calendar year 1998, the end-May 1999 level of net international reserves of the country represented 22.9 weeks of imports as compared to 23.0 weeks of imports at the end of April 1999.