Speech of Mr Mardayah Kona Yerukunondu, First Deputy Governor, Bank of Mauritius, at the JSA-AFR Project on External Sector Statistics

His Excellency the Ambassador of Japan

The Director of the Africa Training Institute

Resource Persons                                                                                                              

Ladies and Gentlemen

Good morning

It is a pleasure for me to address you today at the closing ceremony of the JSA-AFR Project on External Sector Statistics.  I want to thank the IMF for inviting me to share my views on such an important topic.

This project reminds me of a famous quote by Sherlock Holmes. I quote: “It is a capital mistake to theorize before one has data.” Unquote.[1]

Good policy making requires the availability of sound and timely data. Indeed, data are vital elements of any field of study.  Every analysis or research is based on data, which are investigated and interpreted to derive useful information. For the central banking community, the availability of high-quality data is a pre-requisite for various critical purposes—such as for economic analyses, for policy formulation, and for effective surveillance.  Central banks are often mandated in their legislation to collect, compile and disseminate data. And the data that we produce must obviously pass the test of accuracy, credibility and reasonableness.

One of the most important data produced by a central bank is the measurement of cross-border activity. The position of an economy with the rest of the world is a vital macroeconomic indicator. Therefore, measuring an economy’s external sector appropriately is key to assessing macroeconomic conditions and sustainability. It also helps to measure and understand exposure to external shocks.

External sector statistics provide a comprehensive overview of the size and composition of any economy’s

• external trade in goods and services,
• financial transactions with the rest of the world, and
• international asset and liability position, including its debt obligations.

These statistics allow for an assessment of the relative strength of a country’s currency vis-à-vis other countries.

The importance of external sector statistics calls for a well-designed statistical system, with comprehensive reporting requirements and methodologies. These have to be compliant with the best international standards and practices, including those outlined by the IMF. These are but some of the challenges that compilers of external sector statistics have to face. In addition to these, the dynamism in the global economic landscape—prompted by globalisation, financial deregulation, and constantly evolving technological environment—compounds the complexity of the task facing the compilers.

Ladies and gentlemen, we are aware that the compilation and use of external sector statistics pose numerous challenges—such as, difficulties in getting information from non-residents, applying common statistical concepts and processes, data quality and accuracy, and data collection systems. These challenges have called for new data sources, new requirements for data collection, and the measurement/estimation of cross-border activities and financial flows.

Let me now share with you the experience of the Bank of Mauritius in the collection and compilation of external sector statistics.  Mauritius is a small, highly open economy and an international financial centre.  The Bank of Mauritius has benefitted from various technical assistance missions from the IMF in its quest to address data gaps in its compilation of external sector statistics. These missions have enabled Mauritius to bridge these gaps as well as to graduate to the IMF’s SDDS (Special Data Dissemination Standards). Observing these standards imposes self-discipline and requires skilled and well-trained staff resources. Transparency in the statistical domain ensures that the data produced are of sound quality and are reliable. It also adds an element of trust in the functioning of the institution.

It is essential for compilers to ensure that economic and financial statistical data are covered comprehensively. Ideally, statistical data must be of high quality and of high frequency, to support better analysis and policy formulation.  Further, their timely dissemination reinforces transparency on macroeconomic performance and policy.

The Bank of Mauritius is legally empowered by the Bank of Mauritius Act 2004 to prepare the balance of payment accounts and the external assets and liabilities position of Mauritius. Section 51A (2) of the Act stipulates that "the Bank may, by notice in writing, require any person to furnish, within such time and in such form and manner as the Bank may determine, such information and data as the Bank may require for the preparation of the balance of payments accounts and the external assets and liabilities position of Mauritius."

The biggest challenge that we had to face in Mauritius for the compilation of external sector statistics has been the treatment of Global Business Companies (GBC). The global business sector in Mauritius was established in 1992 to attract foreign investment to a wide range of banking and non-banking activities. The suspension of exchange controls in Mauritius in July 1994 contributed to further integrate the Mauritian economy with the rest of the world. GBC transactions became inextricably interwoven with other transactions conducted through and by banks. Through this process, Mauritius gradually became an important financial centre and GBC business started to contribute actively to the Mauritian economy.

Following IMF technical assistance to Mauritius on the collection of statistics from GBCs, the Bank of Mauritius identified, as a priority, the conduct of an annual survey of GBC1 companies to collect financial data for external sector statistics.[2] The Bank of Mauritius has developed an operational arrangement with the Financial Services Commission (FSC) on the conduct of the survey. The survey is, thus, the product of a collaboration between the Bank of Mauritius and the FSC. The FSC is responsible to launch officially the survey and the Bank of Mauritius provides guidance to Management Companies (MCs) to fill in the survey.

To give you an insight into the process, I will briefly describe the conduct of the GBC Survey. The FSC mails the questionnaires to the MCs, which report the financial activities of the GBC1s under their management. The MCs forward their responses to the FSC, which then shares the results MC-wise with the Bank of Mauritius under confidential cover. The Bank of Mauritius reviews the responses and, if required, forwards comments and queries to the MCs through the FSC.  Typically, the Bank of Mauritius does not communicate directly to the MCs.  The Bank of Mauritius has so far conducted ten annual GBC Survey, with the aim to capture stock (position) and flow data on their claims on and liabilities to non-residents for the year ended December for GBC1 companies.

For the compilation of the balance of payments statistics, the Bank of Mauritius embarked on a collaborative approach involving the buy-ins of the main institutions involved in the statistical domain. The survey questionnaire was designed such that it meets the requirements of the Bank of Mauritius, the FSC and Statistics Mauritius (SM). Thus, the questionnaire calls for information required by these three institutions at one go.

The survey information covers both flows and positions data, which form the basis for compiling and reporting the balance of payments, international investment position, coordinated portfolio investment survey and coordinated direct investment survey. Data are gathered from GBC1s for national accounts purposes as required by SM, typically geared towards computing the value added from the GBC sector to gross domestic output.  Also, some other basic statistics are collected, such as the number of persons employed.

The GBC statistical coverage currently constitute a challenge, as it is not a homogeneous sector. The Bank of Mauritius is surveying only GBC1 companies and that too, annually. So, the scope for broadening the coverage and conduct of survey by including the former GBC2 companies and the newly established Authorised Companies represent a key challenge. It is estimated that there are about 10,000 such institutions. This would require huge statistical and human resources as this involves the collection of financial information for over 20,000 companies, including those of GBC1s.

Also, collection of the data annually does not allow to adequately cater for quarterly compilation of external sector data. However, let me reassure you that the Bank of Mauritius is taking the necessary actions to address this shortcoming so that the transactions of the GBC sector are appropriately covered.

In addition to the above, the Bank of Mauritius has a well-established Committee on Data Quality on which all banks sit. This forum facilitates discussions on the quality of data that providers have to satisfy and on the data reporting system.  To assist data providers, the return templates used by the Bank of Mauritius contain the definition of each data element to be reported. This system has improved the quality of data reported to the central bank. In case compilers still have doubts, they can contact the Bank of Mauritius for clarification or for a bilateral meeting to sort out their predicament.

Ladies and Gentlemen, I have briefly touched on the importance of compiling external sector statistics as well as the challenges involved in the measurement of such statistics. I have also shared our experiences, which I am sure can provide for an interesting case study.

Let me end my address with a quote from Johann Wolfgang von Goethe (1830). I quote: “It has been said that figures rule the world; maybe. I am quite sure that it is figures which show us whether it is being ruled well or badly.” Unquote.[3]

Thank you.