Reflecting increases in the net foreign assets of both the Bank of Mauritius and of commercial banks, net foreign assets of the banking system went up by Rs1,092 million or by 5.2 per cent, from Rs21,130 million at the end of August 1999 to Rs22,222 million at the end of September 1999. Net foreign assets of Bank of Mauritius rose for the second consecutive month, increasing by Rs710 million or by 4.7 per cent, from Rs14,986 million at the end of August 1999 to Rs15,696 million at the end of September 1999. Net foreign assets of commercial banks went up by Rs381 million or by 6.2 per cent, from Rs6,145 million at the end of August 1999 to Rs6,526 million at the end of September 1999.

Domestic credit increased by Rs630 million or by 0.8 per cent, from Rs79,483 million at the end of August 1999 to Rs80,113 million at the end of September 1999, thus showing a cumulative increase of Rs3,386 million over the first three months of the current fiscal year.

Net credit to Government went up by Rs418 million or by 2.5 per cent, from Rs16,975 million at the end of August 1999 to Rs17,393 million at the end of September 1999, lower than the rise of 3.9 per cent recorded between end July 1999 and end August 1999. Net credit to Government from Bank of Mauritius declined by Rs491 million or by 10.1 per cent, from Rs4,875 million at the end of August 1999 to Rs4,384 million at the end of September 1999 as against a rise of 18.9 per cent noted between end July 1999 and end August 1999. Net credit to Government from commercial banks rose by Rs908 million or by 7.5 per cent, from Rs12,101 million at the end of August 1999 to Rs13,009 million at the end of September 1999 as compared to the drop of 1.1 per cent recorded between end July 1999 and end August 1999.

Credit to the private sector by commercial banks maintained its upward trend, rising by Rs221 million or by 0.4 per cent, from Rs61,675 million at the end of August 1999 to Rs61,896 million at the end of September 1999. The rise in credit during September 1999 was directed mainly to "Investments in Shares and Debentures" (Rs226 million), "Hotels" (Rs162 million) and "Housing" (Rs66 million). During the first quarter of the current fiscal year, credit to the private sector has expanded by Rs1,790 million or by 3.0 per cent.

Money supply M2 went up by Rs1,798 million or by 2.2 per cent, from Rs81,362 million at the end of August 1999 to Rs83,160 million at the end of September 1999 as compared to an increase of 1.5 per cent recorded between end July 1999 and end August 1999. One component of M2, namely quasi-money, expanded by Rs1,815 million or by 2.5 per cent, from Rs71,190 million at the end of August 1999 to Rs73,005 million at the end of September 1999, higher than the rise of 1.7 per cent registered between end July 1999 and end August 1999. The other component of M2, narrow money supply M1, dropped slightly by Rs17 million or by 0.2 per cent, from Rs10,172 million at the end of August 1999 to Rs10,155 million at the end of September 1999 as against a fall of 0.3 per cent recorded between end July 1999 and end August 1999.

Reserve money rose by Rs281 million or by 2.9 per cent, from Rs9,546 million at the end of August 1999 to Rs9,827 million at the end of September 1999 as compared to a higher increase of 6.9 per cent between end July 1999 and end August 1999.

On the international foreign exchange market, the US dollar, on an average basis, depreciated against all the major currencies during October 1999. The dollar remained vulnerable amid market uncertainty over the direction of US interest rates and continued nervousness over US asset markets. The Pound sterling, deriving support from strong UK economic fundamentals which renewed market expectations of a near-term UK interest rate hike after the Bank of England left its key interest rate on hold at its October 1999 Monetary Policy Committee meeting, reached a peak of US$1.6762. The Euro rallied to an October high of US$1.0874, benefiting from persistent expectations that the ECB would tighten monetary policy before the end of 1999 in view of improved growth prospects in the euro area. The ECB left its key refinancing rate unchanged at 2.5 per cent in October 1999. The Bank of Japan while keeping its monetary policy unchanged at its policy meeting, announced that it would enhance the effectiveness of its near zero interest rate policy by expanding its range of market operations. However, this decision had limited impact on the Japanese yen, which maintained a firm tone against the dollar due to market perception of brighter growth prospects for Japan.

Direct sales of foreign currencies by the Mauritius Sugar Syndicate (MSS) to the banking sector, mainly in Euros, amounted to an equivalent of US$41.8 million during October 1999.

Reflecting international trends and local market conditions, the rupee, on an average basis, depreciated between September 1999 and October 1999 against the Pound sterling, Euro, Japanese yen and US dollar by 2.1 per cent, 2.0 per cent and 1.2 per cent and 0.03 per cent, respectively. The rupee weakened against the Pound sterling to trade at an average rate of Rs42.148 in October 1999 compared with an average rate of Rs41.247 in September 1999. The rupee lost ground against the Euro to trade at an average rate of Rs27.280 in October 1999 as against an average rate of Rs26.725 in the preceding month. The rupee, which traded at an average rate of Rs23.786 per 100 Yen in September 1999, reached an average rate of Rs24.063 per 100 Yen in October 1999. The rupee remained rangebound against the dollar, trading at an average rate of Rs25.446 in October 1999 as against an average rate of Rs25.438 in September 1999.

The foreign exchange reserves of the Bank of Mauritius increased by Rs578 million, from Rs15,696 million at the end of September 1999 to Rs16,274 million at the end of October 1999.

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 Rs1,097 million, from Rs21,633 million at the end of August 1999 to Rs22,730 million at the end of September 1999. Based on the value of the import bill for fiscal year 1998-99, excluding the purchase of aircraft, the end-September 1999 level of net international reserves of the country represented 22.9 weeks of imports as compared to 21.8 weeks of imports at the end of August 1999.