Mauritius Central Bank Cuts Interest Rate to Stimulate Economy
The Bank of Mauritius has announced another cut in interest rates, its ninth reduction in the past 30 months. This move aims to boost economic growth by stimulating borrowing and spending by individuals and businesses.
Economic Uncertainties and Challenges
The decision comes amid concerns over the island nation’s slowing economy, which has been affected by global economic uncertainties and a decline in tourist arrivals. The Bank of Mauritius has reduced its key interest rate by 2.75 percentage points since January last year to encourage lending and investment.
Interest Rate Cuts
- The Lombard rate has been cut down to 9.75% from 12.5%.
- Prime lending rates of commercial banks have fallen to 8.5% from 11%.
Plans for Monetary Policy Transparency
The bank’s governor emphasized the need for monetary policy transparency and announced plans to develop a secondary market for government debt instruments.
Development of Bond Market
Industry experts believe that the development of a bond market could provide the Bank of Mauritius with a good medium for conducting monetary policy and help reduce the country’s reliance on foreign borrowing. The stock exchange of Mauritius has also expressed interest in trading government debt instruments, paving the way for the launch of a bond market soon.
Impact on Savers
The central bank’s efforts to boost economic growth have been welcomed by savers, who face the vicissitudes of interest rates not only in Mauritius but globally. Risk-averse investors, including those dependent on their pensions for living, have not had access to risk-free investment avenues.
Open Market Operations
The Bank of Mauritius has started selling Treasury bills over-the-counter to individual investors, which has been a helpful method of conducting open market operations in a less developed market.
Transparency and Confidence
The bank’s governor emphasized the importance of transparency in monetary policy-making and announced plans to increase transparency in the area of interest rate setting. He also expressed confidence that the Bank of Mauritius would live up to the challenges of monetary policy in the years ahead, despite an uncertain external environment.
Outlook for Economic Growth
As the country heads into the holiday season, the central bank’s efforts are expected to have a positive impact on economic growth and stability in 2004.