Overview

Net foreign assets of the banking system fell by Rs233 million, or 1.0 per cent, from Rs23,954 million at the end of April 2000 to Rs23,721 million at the end of May 2000. Net foreign assets of the Bank of Mauritius decreased by Rs506 million, or 2.9 per cent, from Rs17,728 million to Rs17,222 million. Net foreign assets of commercial banks increased by Rs273 million, or 4.4 per cent, from Rs6,226 million to Rs6,499 million.

Domestic credit expanded by Rs936 million, or 1.1 per cent, from Rs84,124 million at the end of April 2000 to Rs85,060 million at the end of May 2000.

Net credit to Government grew by Rs390 million, or 2.1 per cent, from Rs18,270 million at the end of April 2000 to Rs18,660 million at the end of May 2000. Net credit to Government from the Bank of Mauritius increased by Rs204 million, or 8.2 per cent, from Rs2,495 million to Rs2,699 million. Net credit to Government from commercial banks also went up by Rs186 million, or 1.2 per cent, from Rs15,775 million to Rs15,961 million.

A noteworthy development has been an increase in commercial banks' credit to the private sector. In fact, commercial banks' credit to the private sector increased by Rs561 million, or 0.9 per cent, from Rs65,107 million at the end of April 2000 to Rs65,668 million at the end of May 2000. Net additional credit was allocated to the manufacturing sector (Rs303 million), the construction sector (Rs175 million) and to the sugar industry (Rs166 million).

Money supply M2 rose by Rs109 million, or 0.1 per cent, from Rs87,713 million at the end of April 2000 to Rs87,822 million at the end of May 2000. Quasi-money, one of the components of M2, registered an increase of Rs230 million, or 0.3 per cent, from Rs77,039 million to Rs77,269 million. Narrow money supply decreased by Rs121 million, or 1.1 per cent, from Rs10,674 million to Rs10,553 million.

Reserve money fell by Rs156 million, or 1.6 per cent, from Rs9,934 million at the end of April 2000 to Rs9,778 million at the end of May 2000.

During the month of June 2000, the Bank of Mauritius advanced funds to one commercial bank under the Lombard Facility.

On the international foreign exchange market, the US dollar, on an average basis, depreciated against the Euro and Japanese yen but appreciated marginally vis-à-vis the Pound sterling during June 2000. The US dollar remained vulnerable throughout the month, undermined by the release of data which pointed to a slowdown in the US booming economy and reinforced expectations that the Federal Reserve’s rate hikes might be nearly over. As widely expected, on 28 June 2000 at its FOMC meeting, the Federal Reserve left its federal funds rate unchanged at 6.50 per cent. However, in its accompanying statement, the committee noted that the risks continued to be weighed mainly towards conditions that might generate heightened inflationary pressures in the foreseeable future. The Euro, deriving support from a shift in market sentiment against the background of improved euro zone economic data made headway against the dollar. Market perception of narrowing interest rate and economic growth differentials between the US and the euro zone also benefited the single currency. On 8 June 2000, the ECB, at its governing council meeting, surprised the market by raising its key refinancing rate by a larger-than-expected 50 basis points to 4.25 per cent. The ECB, at its meeting, also announced a shift from its present fixed-rate system to a variable rate money market auction from June 28. The Japanese yen gained ground vis-à-vis the dollar, on the back of improved economic sentiment in Japan and mounting expectations that the Bank of Japan was about to end its long-standing ultra-loose monetary policy. However, market wariness of Bank of Japan intervention limited the yen’s gains vis-à-vis the dollar. The Pound sterling eased marginally against the dollar. According to analysts, market expectations of the interest rate differential between the US and UK would continue to be key of the near term direction of the Pound against the dollar. The Bank of England, at its Monetary Policy Committee meeting on 6-7 June 2000, against a backdrop of below-target inflation and signs of slowdown in earnings growth, left its repo rate unchanged at 6.0 per cent.

Direct sales of foreign currencies by the Mauritius Sugar Syndicate (MSS) to the banking sector during June 2000 amounted to an equivalent of US$2.7 million. The Bank of Mauritius intervened in the interbank foreign exchange market selling a total amount of US$15.5 million.

Reflecting international trends and local market conditions, the rupee, on average, depreciated between May 2000 and June 2000 by 0.8 per cent against both the US dollar and Pound sterling, by 2.6 per cent against the Japanese yen and by 5.2 per cent against the Euro. The rupee edged down against the US dollar, trading at an average of Rs26.194 in June 2000 as against an average rate of Rs25.980 in May 2000. The rupee eased vis-à-vis the Pound sterling to trade at an average rate of Rs39.507 in June 2000 compared with an average of Rs39.181 in May 2000. The rupee lost ground against the euro to trade at an average rate of Rs24.866 in June 2000 as against an average rate of Rs23.569 in the preceding month. The rupee weakened vis-à-vis the Japanese yen, to trade at an average rate of Rs24.732 per 100 Yen in June 2000 as against an average of Rs24.089 per 100 Yen in May 2000.

On an average basis, between January 1999 and June 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 9.6 per cent, 14.3 per cent, 16.6 per cent, 18.6 per cent, 21.2 per cent, 22.1 per cent, 27.5 per cent and 28.1 per cent, respectively.

The foreign exchange reserves of the Bank of Mauritius increased by Rs233 million, from Rs17,222 million at the end of May 2000 to Rs17,455 million at the end of June 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 Rs229 million, from Rs24,445 million at the end of April 2000 to Rs24,216 million at the end of May 2000. Based on the value of the import bill for the calendar year 1999, excluding the purchase of aircraft, the end-May 2000 level of net international reserves of the country represented 23 weeks of imports, slightly down from 23.3 weeks at the end of April 2000.