Reviewing developments in the monetary sector, the Governor rationalised the monetary policy stance being pursued by the Bank. He stressed that, with the reorientation that was brought about in monetary policy towards the end of 1998, greater stability has been imparted to the exchange rate of the rupee. He also highlighted the progress made in achieving the monetary policy objectives of the Bank.

While showing concern for the high differential rate of inflation between Mauritius and our major trading partners over the last ten years, the Governor emphasized the importance of promoting stable monetary conditions with a view to achieving macroeconomic stability, thereby creating an environment conducive to growth.

The Governor emphasized the importance of achieving financial stability failing which future growth prospects could be jeopardised. He also reiterated the need for enhancing sound banking practices. The executives of banks reacted positively to the various issues raised by the Governor with regard to the banking sector.

The Governor stressed the need to pursue a prudent wage policy in order to ensure sound economic management. It was mentioned that inappropriate wage increases would affect the competitiveness of the economy. The Governor laid emphasis on the need for promoting productivity growth in the Mauritian economy with a view to sustaining our competitive edge.

Reviewing projected developments in the external sector, the Governor underlined that a lower current account deficit of the balance of payments has been forecast for the year 1999-2000 compared to 1998-99. From a balance of payments perspective, the projected shortfall in sugar export receipts during 1999-2000 would be partly offset by reinsurance claims receivable from abroad as well as by increased receipts from other sectors. The Governor expressed optimism regarding exchange rate developments. In this connexion, the Bank of Mauritius is aiming at making the appropriate macroeconomic trade-offs in monetary policy decisions.

The representatives of the private sector raised several economic and financial issues. A fruitful interaction with the Governor followed and the Governor reassured them that their views will be taken into account in policy formulation.

Bank of Mauritius

22 April 1999