The Bank of Mauritius started, with effect from 14 December 1998, the sale of Treasury Bills over the counter to individuals and non-financial corporations with a view to providing savers with alternative investment opportunities and encouraging their active participation in the market for Government securities.

The net foreign assets of the banking system increased by 11.0 per cent in December 1998, up from 0.7 per cent in the previous month. Collectively, commercial banks registered in December 1998 a net outflow of Rs9 million only in their foreign remittances, down from Rs1,599 million in November 1998.

Total domestic credit went up by 1.5 per cent in December 1998, following an increase of 1.2 per cent in November 1998.

After registering increases in the two previous months, central bank credit to the Government dropped by 10.3 per cent in December 1998. Concurrently, net credit to the Government from commercial banks went up by 2.1 per cent, after dropping in the two previous months. Total credit to Government from the banking sector as a whole fell by 1.6 per cent in December 1998, as against a drop of 0.8 per cent in November 1998.

Commercial banks' credit to the private sector went up by 2.6 per cent in December 1998, up from 1.9 per cent a month earlier. In absolute terms, private sector credit increased by Rs1,398 million, the bulk of which was directed to the Sugar Industry (Rs431 million), investments in tax-free debentures (Rs360 million), Financial Institutions (Rs215 million), Hotels (Rs180 million) and EPZ (Rs160 million).

The combined effect of increases in net foreign assets and domestic credit, coupled with payments of end-of-year bonus to employees of the public and private sectors, caused a major expansion of 3.3 per cent in money supply M2 in December 1998, up from 0.4 per cent a month earlier. However, as reserve money registered an increase of 5.6 per cent in December 1998, due essentially to seasonal increases in currency with the public and currency with banks, the money multiplier for M2 dropped from 7.9 in November 1998 to 7.7 in December 1998. Total private sector deposits with commercial banks, inclusive of foreign currency deposits, increased by 2.0 per cent in December 1998, up from 0.5 per cent in November 1998.

Direct sales of foreign currencies by the Mauritius Sugar Syndicate (MSS) to the banking sector, mainly in Euros, amounted to an equivalent of US$30.7 million in January 1999.

January 1999 was marked by an historical event, the launching of the Euro, the single currency for 11 European nations. The Euro made its debut on the international foreign exchange market on 4 January 1999 replacing its precursor, the ECU, on a one-to-one basis. As the euphoria over the birth of the single currency settled, the Euro weakened vis-à-vis the US dollar throughout January 1999 on concerns about a possible slowdown in economic growth in Europe as against a more optimistic economic outlook for the US. On the international foreign exchange market, the US dollar also appreciated against the Pound sterling but depreciated against the Japanese yen.

Reflecting international trends and local market conditions, the rupee appreciated against the European currencies but depreciated against the US dollar and the Japanese yen during the month of January 1999. Against the Euro, the rupee traded at an average rate of Rs28.987 in January 1999. The rupee appreciated against the Pound sterling, trading at an average rate of Rs41.161 in January 1999 as against an average of Rs41.595 in December 1998. The rupee depreciated marginally vis-à-vis the US dollar, trading at an average of Rs24.970 in January 1999 as against an average of Rs24.917 in December 1998. Against the Japanese yen, the rupee traded at an average of Rs22.132 per 100 yen in January 1999 as compared to an average of Rs21.281 per 100 yen in December 1998.

The foreign exchange reserves of the Bank of Mauritius rose from Rs13,866.6 million at the end of December 1998 to Rs15,187.7 million at the end of January 1999.

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 Rs1,954 million, from Rs17,940 million at the end of November 1998 to Rs19,894 million at the end of December 1998. Based on the value of the import bill for the fiscal year 1997-98 (excluding the purchase of aircraft and marine vessel), the end-December 1998 level of net international reserves of the country represented 22.1 weeks of imports as compared to 19.9 weeks of imports at the end of November 1998.

The rate of inflation for the calendar year 1998 was 6.8 per cent as against 6.6 per cent for 1997.

The Deutsche Bank (Mauritius) Limited became the tenth offshore bank in operation in Mauritius on 4 February 1999. It is a subsidiary of Deutsche Bank AG of Germany through its Jersey subsidiary, namely Deutsche Morgan Grenfell (C.I.) Limited. The new offshore bank will operate from Le Caudan Waterfront, Port Louis.

Deutsche Bank A.G has branches in 24 countries other than Germany and has wholly owned subsidiaries in 13 other countries.

Deutsche Bank (Mauritius) Limited will engage in a wide range of activities including offshore banking, fund administration, corporate and fiduciary services and global custody.