Total domestic credit declined by 1.3 per cent, or by Rs988 million between end December 1998 and end January 1999. In the previous month, it had increased by 1.5 per cent.

Net credit to Government from the banking system declined for the third consecutive month, falling by 7.1 per cent or by Rs1,284 million in January 1999 as compared to a fall of 1.6 per cent in December 1998. Net credit to Government from the Bank of Mauritius fell by 16.0 per cent, or by Rs774 million in January 1999 as against a fall of 10.3 per cent in the previous month. Net credit to Government from commercial banks dropped by 3.9 per cent or Rs510 million in January 1999 as against an increase of 2.1 per cent in December 1998.

Commercial banks' credit to the private sector grew at a much lower rate of 0.5 per cent in January 1999 as compared to 2.6 per cent in the previous month. In absolute terms, it went up by Rs304 million. Most of the credit extended in January 1999 was directed to "Traders" (Rs267 million) and investments in tax-free debentures (Rs345 million). Major declines in credit were noted in "EPZ" (Rs108 million), "Building Contractors, Commercial Premises and Real Estate Developers" (Rs106 million) and "Other Industries & Manufacturers" (Rs101 million).

Money supply M2 rose by 0.5 per cent, or by Rs389 million to Rs75,818 million in January 1999. In December 1998, M2 rose by 3.3 per cent. Reserve money edged up by 0.2 per cent or by Rs17 million as against a rise of 5.6 per cent in December 1998.

Commercial banks recorded a net inflow of Rs532 million in their foreign remittances in January 1999.

Direct sales of foreign currencies by the Mauritius Sugar Syndicate (MSS) to the banking sector, mainly in Euros, amounted to an equivalent of US$13.0 million in February 1999. The Bank of Mauritius sold through intervention on the interbank foreign exchange market an amount of US$5.0 million to commercial banks.

During February 1999, the US dollar strengthened against the Euro, Japanese yen and Pound sterling on the international foreign exchange market. The US dollar firmed up on account of the relatively more optimistic economic outlook in the US. During February 1999, the Euro came under downward pressure against the dollar as market sentiment remained bearish on the new currency amid diverging economic fundamentals between the US and the eurozone. At its Monetary Policy Committee meeting in February 1999, the Bank of England cut its key interest rate for the fifth consecutive month by 0.5 percentage point to 5.5 per cent.

Reflecting both international trends and local market conditions, the rupee depreciated against the US dollar but gained ground vis-à-vis the European currencies and Japanese yen during February 1999. The rupee was marginally weaker against a strong US dollar, trading at an average of Rs25.09 in February 1999 as against an average of Rs24.97 in January 1999. The rupee appreciated against the Euro, trading at an average rate of Rs28.171 in February 1999 compared to Rs28.987 in January 1999. The rupee also appreciated vis-à-vis the Pound sterling to trade at an average rate of Rs40.876 in February 1999 as compared to Rs41.161 in January 1999. Against the Japanese yen, the rupee traded at an average of Rs21.616 per 100 yen in February 1999 as compared to an average of Rs22.132 per 100 yen in January 1999.

The foreign exchange reserves of the Bank of Mauritius rose from Rs15,187.7 million at the end of January 1999 to Rs15,368.2 million at the end of February 1999. Recent increases in the foreign exchange reserves of the Bank of Mauritius also reflect the enhanced attractiveness of rupee denominated assets.

Net international reserves of the country, made up of the net foreign assets of the banking system, foreign assets of the Government and the country’s Reserve Position in the International Monetary Fund (IMF) increased by Rs1,549 million, from Rs19,895 million at the end of December 1998 to Rs21,444 million at the end of January 1999. Based on the value of the import bill for the fiscal year 1997-98 (excluding the purchase of aircraft and marine vessel), the end-January 1999 level of net international reserves of the country represented 23.8 weeks of imports as compared to 22.1 weeks of imports at the end of December 1998.