Net foreign assets of the banking system fell by Rs448 million or by 2.1 per cent, from Rs21,578 million at the end of July 1999 to Rs21,130 million at the end of August 1999. Net foreign assets of Bank of Mauritius went up by Rs29 million or by 0.2 per cent, from Rs14,957 million at the end of July 1999 to Rs14,986 million at the end of August 1999 as compared to a drop of Rs358 million recorded between end-June 1999 and end-July 1999. Net foreign assets of commercial banks declined by Rs477 million or by 7.2 per cent, from Rs6,621 million at the end of July 1999 to Rs6,144 million at the end of August 1999 as against a fall of Rs151 million recorded between end-June 1999 and end-July 1999.

Domestic credit rose by Rs1,521 million or by 2.0 per cent, from Rs77,962 million at the end of July 1999 to Rs79,483 million at the end of August 1999, resulting in an expansion of Rs2,756 million in the first two months of the current financial year as compared to a lesser increase of Rs2,285 million in the corresponding period of 1998-99.

Net credit to Government from the banking system went up by Rs635 million or by 3.9 per cent, from Rs16,340 million at the end of July 1999 to Rs16,975 million at the end of August 1999 as against an increase of Rs326 million recorded between end-June 1999 and end-July 1999. Net credit to Government from Bank of Mauritius rose by Rs776 million or by 18.9 per cent, from Rs4,099 million at the end of July 1999 to Rs4,875 million at the end of August 1999 as against a drop of 10.4 per cent recorded between end-June 1999 and end-July 1999. Net credit to Government from commercial banks declined by Rs140 million or by 1.1 per cent, from Rs12,240 million at the end of July 1999 to Rs12,100 million at the end of August 1999. Between end-June 1999 and end-July 1999, it had increased by 7.0 per cent.

The upward trend noted in the growth rate of credit to the private sector by commercial banks in July 1999 was maintained in August 1999. After registering an increase of Rs922 million or 1.5 per cent in July 1999, credit to the private sector from commercial banks went up further by Rs647 million or by 1.1 per cent to Rs61,675 million at the end of August 1999. The increase in credit, between end-July 1999 and end-August 1999 was directed mainly to "Manufacturing Sector" (Rs220 million), "Construction Sector" (Rs194 million) and "Personal & Professional and Other Customers" (Rs184 million).

After registering a decline of Rs9 million between end-June 1999 and end-July 1999, money supply M2 rose by Rs1,167 million or by 1.5 per cent, from Rs80,195 million at the end of July 1999 to Rs81,362 million at the end of August 1999. One component of M2, narrow money supply, M1 fell by Rs28 million or by 0.3 per cent, from Rs10,200 million at the end of July 1999 to Rs10,172 million at the end of August 1999 as compared to a larger decline of 6.5 per cent registered between end-June 1999 and end-July 1999. The other component of M2, quasi-money rose by Rs1,196 million or by 1.7 per cent, from Rs69,994 million at the end of July 1999 to Rs71,190 million at the end of August 1999. Between end-June 1999 and end-July 1999, it had increased by 1.0 per cent.

Reserve money went up by Rs616 million or by 6.9 per cent, from Rs8,930 million at the end of July 1999 to Rs9,546 million at the end of August 1999 as compared to a decline of 13.7 per cent recorded between end-June 1999 and end-July 1999.

On the international foreign exchange market, the US dollar, on an average basis, depreciated against the Japanese yen and Pound sterling but appreciated vis-à-vis the Euro during September 1999. The Japanese yen maintained its uptrend against the dollar, reaching a three-and-a-half year high of 103.74 on the Asian market as expectations that Tokyo and Washington would agree to intervene jointly to curb the yen's appreciation were not fulfilled. However, towards the end of September, the yen’s strength against the dollar was subdued as uncertainty lingered over the intentions of the Bank of Japan and the Group of Seven nations. The Pound sterling got a boost vis-à-vis the dollar after the Bank of England surprised the market by raising its repo rate by 25 basis points to 5.25 per cent at its September 1999 Monetary Policy Committee meeting despite the fact that inflation in the UK was expected to remain below its 2.5 per cent target in the short term. Prospects for further UK interest rate hikes by year-end and improved economic growth also supported the Pound. The Euro, largely sidelined throughout September 1999 by the market’s preoccupation of the yen’s ascent vis-à-vis the dollar, remained weak against the dollar. However, the Euro managed to close the month on a firmer tone as strengthening Euro zone economic fundamentals and expectations that the ECB might raise interest rates before year-end encouraged Euro buying.

Direct sales of foreign currencies by the Mauritius Sugar Syndicate (MSS) to the banking sector, mainly in Euros, amounted to an equivalent of US$40.2 million during September 1999. Moreover, the Bank of Mauritius sold through intervention on the interbank foreign exchange market an amount of US$3.0 million to commercial banks in the same month.

Reflecting global trends and local market conditions, the rupee, on an average basis, depreciated between August 1999 and September 1999 against the Japanese yen, Pound sterling and US dollar by 5.5 per cent, 1.1 per cent and 0.1 per cent, respectively, but appreciated vis-à-vis the Euro by 1.0 per cent. The rupee, which traded at an average rate of Rs22.484 per 100 yen in August 1999, reached Rs23.786 per 100 yen in September 1999. The rupee lost ground against the Pound sterling to trade at an average rate of Rs41.247 in September 1999 as compared with an average rate of Rs40.805 in the preceding month. The rupee remained in a tight range against the dollar, trading at an average rate of Rs25.438 in September 1999 as against an average rate of Rs25.420 in August 1999. Against the Euro, the rupee firmed up to trade at an average of Rs26.725 in September 1999 as against an average rate of Rs26.980 in August 1999.

The foreign exchange reserves of the Bank of Mauritius increased by Rs710 million, from Rs14,986 million at the end of August 1999 to Rs15,696 million at the end of September 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), decreased by Rs444 million, from Rs22,077 million at the end of July 1999 to Rs21,633 million at the end of August 1999. Following the release of external trade data for the second quarter of 1999, import coverage is now based on the value of the import bill for fiscal year 1998-99, excluding the purchase of aircraft. On this basis, the end-August 1999 level of net international reserves of the country represented 21.8 weeks of imports as compared to 22.3 weeks of imports at the end of July 1999.