Mauritius central bank & finance ministry to enter agreement to end rate debate
A memorandum of understanding between the Ministry of Finance and the Bank of Mauritius will be signed shortly for effective coordination on issues such as tackling excess liquidity and setting up an inflation target, said Mauritius PM Navin Ramgoolam (Image: MBC)
Mauritius Prime Minister Navin Ramgoolam indicated that a long-standing row over the direction of interest rates could come to an end as the Bank of Mauritius and the finance ministry agreed to set an inflation target as well as thresh out other monetary policy issues.
He made this welcome announcement at the Mauritius Chamber of Commerce dinner on Friday June 27, 2014.
The debate between the Governor of the Bank of Mauritius, Rundheersing Bheenick, and former Finance Minister Xavier-Luc Duval centred on the conduct of the monetary policy.
To encourage people to save their money, the central bank proposed an increase in the rate whereas Duval disagreed with the proposal of the Central Bank because he wanted to keep rates fixed to stimulate business growth and insisted that BOM should use other means to draw out excess liquidity.
As Xavier-Luc Duval has resigned from his duties as finance minister in June, the Prime Minister has taken over the finance portfolio as an interim measure.
The finance ministry appointed eight members of the Mauritius’ Monetary Policy Committee and when the committee last met in April, five of them held the benchmark repo rate at 4.65 per cent while some members argued for a rise.
“A memorandum of understanding between the Ministry of Finance and the Bank of Mauritius will be signed shortly that should ensure better clarity on monetary policy and effective coordination on issues such as the management of excess liquidity and the setting up of an inflation target,” Prime Minister Navinchandra Ramgoolam said.
Ramgoolam did not give any details on when the deal would be signed but he stated that the deal could bring an end to the public row over interest rates and other aspects of monetary policy.
Besides, the year-on-year inflation, which is used by the central bank to set monetary policy, was 4.20% in April and fell to 3.40% in May.