Mauritius Central Bank Statement

Author: | Published: 5 Sep 2017
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In this challenging era, where risks and vulnerabilities are very much present, Mauritius is pursuing the implementation of a suite of policy measures to tackle economic bottlenecks and unlock new opportunities for domestic and foreign investors in order to propel the economy to a higher growth path. Business facilitation measures and major investments in public infrastructure over the coming years are expected to bolster economic activity. Real economic growth is expected to rise to 3.7% in 2017.

The financial sector continues to expand steadily. The banking sector remains well capitalised and enjoys a comfortable liquidity position. However, the Mauritian financial sector faces numerous challenges. Two overriding ones are how best to address risks associated with the offshore business sector and how best to maintain the competitive advantage of the financial sector as a whole. Further challenges emerged in 2016 from the potential fallouts of Brexit and the revision to the Double Taxation Avoidance Agreement (DTAA) with India. While the impact of Brexit on the economy is yet to be fully gauged, there has been no capital flight consequent to the DTAA revision, due to business diversification and new opportunities tapped by banks.

To address some of these challenges, the Bank of Mauritius launched several key projects since 2015 to strengthen the supervision and fundamentals of the banking industry, modernise the financial markets infrastructure and improve the efficacy of monetary policy. Moreover, the authorities have taken steps to enhance the position of Mauritius as a transparent, collaborative international financial centre. The jurisdiction has signed an agreement with the United States to implement the Foreign Accounts Tax Compliance Act, is committed to the early execution of the Common Reporting Standard introduced by the OECD and is ready to adopt the Base Erosion Profit Shifting.

Banking sector reforms have reached an advanced stage. The upgrading of existing prudential guidelines is completed. Integrating the crisis management and resolution framework into the banking legislation, which is under review, is on-going. The first phase of the stress testing framework has been rolled out and the results are helping to address weaknesses. Another milestone in strengthening off-site surveillance of financial institutions is the introduction of a risk-based supervisory framework. The Deposit Insurance Scheme and National Payments System legislation are awaiting enactment.

The modernisation of the financial markets infrastructure is well on track. The on-going implementation of the National Payment Switch will provide an impetus to digital banking. The switch will make mobile payments interoperable, boost competition in the retail payment area, and enable the government to offer better services via the e-government platform. Mindful of technology-driven innovation in the finance world, the Bank of Mauritius has established a joint forum with banks to deliberate on potential uses and implications of disruptive technologies and how to adapt the regulatory framework.

Monetary policy has remained broadly accommodative and supportive of the economy. A new monetary policy framework will be rolled out to enhance the transmission of mechanism. The exchange rate of the rupee is broadly in line with macroeconomic fundamentals. Inflation remains low at 1.9% in May 2017. The economic and financial policies continue to attract capital inflows, raising the level of the foreign exchange reserves to $5.2 billion in May 2017.

With these measures, the Bank of Mauritius is on course to sustain macroeconomic and financial stability and ensure the soundness and attractiveness of the banking sector.

 


 

 

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