Overview

After going down in the two preceding months, net foreign assets of the banking system rose by Rs434 million or by 1.9 per cent, from Rs22,889 million at the end of August 2000 to Rs23,323 million at the end of September 2000. Net foreign assets of Bank of Mauritius dropped by Rs31 million or by 0.2 per cent, from Rs16,926 million to Rs16,895 million. Net foreign assets of commercial banks went up by Rs464 million or by 7.8 per cent, from Rs5,964 million to Rs6,428 million.

Domestic credit maintained an expansionary trend, rising by Rs767 million or by 0.9 per cent, from Rs88,864 million at the end of August 2000 to Rs89,631 million at the end of September 2000.

Net credit to Government increased by Rs533 million or by 2.8 per cent, from Rs19,095 million at the end of August 2000 to Rs19,628 million at the end of September 2000. Net credit to Government from Bank of Mauritius went up by Rs350 million or by 8.7 per cent, from Rs4,023 million to Rs4,373 million. Net credit to Government from commercial banks rose by Rs183 million or by 1.2 per cent, from Rs15,072 million to Rs15,255 million.

Credit to the private sector from commercial banks went up by Rs246 million or by 0.4 per cent, from Rs69,077 million at the end of August 2000 to Rs69,323 million at the end of September 2000. Additional credit was extended by commercial banks to "Hotels" (Rs127 million), "Statutory & Parastatal Bodies" (Rs85 million), "Traders" (Rs79 million) and "Personal & Professional" (Rs67 million).

Money supply M2 increased by Rs1,296 million or by 1.4 per cent, from Rs90,182 million at the end of August 2000 to Rs91,478 million at the end of September 2000. Narrow money supply, one of the components of M2, rose by Rs490 million or by 4.4 per cent, from Rs11,058 million to Rs11,548 million. Quasi-money, the other component of M2, went up by Rs806 million or by 1.0 per cent, from Rs79,124 million to Rs79,930 million.

The level of reserve money went up by Rs317 million or by 3.2 per cent, from Rs10,007 million at the end of August 2000 to Rs10,324 million at the end of September 2000.

Based on liquidity conditions in the market, the Bank carried out three repo transactions and one reverse repo transaction with commercial banks in October 2000 for periods varying from 2 to 4 days. The lowest yield accepted for repo transactions was 7.60 per cent and the highest yield accepted for reverse repo transactions was 7.80 per cent.

Between end June 2000 and end September 2000, the number of Automated Teller Machines (ATMs) in operation in Mauritius increased by 7 from 221 to 228 and the number of cardholders (that is to say the number of cards in circulation) went up by 15,799 from 610,849 to 626,648. The number of transactions involving the use of credit cards, debit cards, ATMs and Merchant Point of Sales dropped from 1.416 million in June 2000 to 1.390 million in September 2000. However, the value of such transactions increased from Rs1,998 million to Rs2,042 million over that period. Outstanding advances on credit cards rose from Rs536 million to Rs547 million.

On the international foreign exchange market, during October 2000, the US dollar, on an average basis, appreciated against the euro and Japanese yen but depreciated vis-à-vis the Pound sterling. As widely expected, on 3 October 2000, the Federal Reserve at its FOMC meeting left its federal funds rate unchanged at 6.50 per cent. However, in its accompanying statement, the Federal Reserve maintained a tightening bias saying that inflationary pressures were still a concern given the tight US labour market and higher energy prices. The ECB, at its governing council meeting on 5 October 2000, surprised the market by raising its key refinancing rate by a quarter percentage point to 4.75 per cent. The move, which was aimed at stemming price pressures due to the recent surge in oil prices and at further supporting the euro, brought about only a short-lived rally of the euro as investors raised concerns that the hike might hurt the already slow euro area growth. Amid escalating tensions in the Middle East and following negative comments by ECB President that it would be inappropriate for the G7 to intervene when the currency is being hit by external factors, the euro maintained its downslide against the dollar. At the conclusion of the G20 nations meeting, with no euro-supportive comments, the single currency dropped below US$0.83 for the first time and attained its lifetime low of US$0.8225 in European trade on 26 October 2000. However, at the close of the month, the euro managed to recover against the dollar trading around US$0.8402. The release of slower-than-expected US GDP growth data and confirmation that the UN was to allow Iraq to receive oil-export payments in euros instead of dollars provided support to the single currency. The Japanese yen remained vulnerable against the dollar, hurt by several negative factors. The failure of two leading Japanese insurance companies in October had raised doubts about Japan’s economic outlook while political concerns after the resignation of the Cabinet Secretary also weighed on the yen. The Pound sterling gained ground on the US dollar, deriving support from its safe-haven appeal that was bolstered in the wake of Middle East tensions and from renewed market expectations of higher interest rates following the release of strong economic data in the UK. However, towards the end of October, the Pound sterling, taking its cue from the euro/dollar movement, reached a low of US$1.4330 before recovering to close the month at around US$1.4503. The Bank of England at its MPC meeting on 3 October 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 October 2000 amounted to an equivalent of US$33.6 million. The Bank of Mauritius intervened in the interbank foreign exchange market selling a total amount of US$10.9 million.

Reflecting international trends and local market conditions, the rupee, on average, depreciated between September 2000 and October 2000 against the Pound sterling and US dollar by 2.6 per cent and 1.5 per cent, respectively. It, however, appreciated vis-à-vis the euro and Japanese yen by 0.4 per cent and 0.1 per cent, respectively. The rupee lost ground against the US dollar, trading at an average rate of Rs26.937 in October 2000 as against an average rate of Rs26.541 in September 2000. The rupee weakened against the Pound sterling to trade at an average rate of Rs39.126 in October 2000 compared with an average rate of Rs38.096 in September 2000. In the wake of the euro’s broad-based weakness against major currencies on the international front, the rupee probed higher vis-à-vis the single currency to trade at an average rate of Rs23.066 in October 2000 from an average rate of Rs23.158 in the previous month. The rupee gained ground on the Japanese yen to trade at an average rate of Rs24.914 per 100 Yen in October 2000 as against an average rate of Rs24.929 per 100 Yen in September 2000.

On an average basis, between January 1999 and October 2000, the Philippines peso, South African rand, Thailand baht, Mauritian rupee, Singapore dollar, Indonesian rupiah, Hong Kong dollar, Taiwan dollar and Korean won appreciated against the euro by 7.5 per cent, 9.3 per cent, 14.6 per cent, 25.7 per cent, 29.8 per cent, 30.5 per cent, 34.3 per cent, 37.2 per cent and 40.8 per cent, respectively.

The foreign exchange reserves of the Bank of Mauritius increased by Rs91 million, from Rs16,895 million at the end of September 2000 to Rs16,986 million at the end of October 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), increased by Rs434 million, from Rs23,388 million at the end of August 2000 to Rs23,822 million at the end of September 2000. Following the release of external trade data for the second quarter of 2000, import coverage has been revised and is now based on the value of the import bill for fiscal year 1999-00, excluding the purchase of aircraft. On this basis, the end-September 2000 level of net international reserves of the country represented 22.5 weeks of imports, up from 22.1 weeks at the end of August 2000.