Presented by Mr Patrick Yip Wang Wing, Ag. Deputy

Transcript:Presented by Mr Patrick Yip Wang Wing, Ag. Deputy:
Presented by Mr Patrick Yip Wang Wing, Ag. Deputy Financial Secretary The Policy Context Government restated its resolve to embark on a Transformation Agenda underpinned by the 3 objectives of :– High Income Inclusiveness Sustainability Specific Policy Announcements Reform of the public sector, in particular rationalisation of activities of parastatal bodies Reforms in business facilitation, with particular attention to SMEs Reactivation of the Financial Services Consultative Council to take the sector to a new threshold of development Better coordination of macroeconomic policies The High Income Economy First announced in Government Programme 2012-2015 Mauritius’ per capita GNI at US$9,300 in 2013 - covered 72% of the road to High Income Country status (US$ 12,746) MOFED launched consultations with stakeholders on measures for accelerating this national effort, particularly on : well-focused structural policies to boost growth, productivity and competitiveness; fundamental reforms in key areas of the economy and society; and strong and effective macroeconomic policies. Coordination of Macroeconomic Policies Memorandum of Understanding between MOFED and BOM: Effective management of excess liquidity and sharing of cost; Strengthening Bank of Mauritius’ capital; and Setting of an inflation target. Explicit Inflation Target To better anchor inflation expectations and factor in other economic considerations such as growth and employment To also facilitate the work of the MPC Standing Committee on Inflation Target (MOFED and BOM) to pursue discussions on the inflation target and the modus operandi Excess Liquidity IMF recommendation: Mopping up of excess liquidity to be accompanied by a technical downward adjustment in the Key Repo Rate This is necessary to speed up the convergence between the Policy Rate and the Interbank Rate, and allow for greater effectiveness of the monetary transmission mechanism Excess Liquidity … cont’d IMF supports comprehensive approach of Joint Working Committee on Liquidity at MOFED Various measures and policy options subject of in-depth technical discussions and extensive consultations between MOFED, BOM and IMF Latest draft MoU, which MOFED has shared with the Bank, should provide a solid and sound foundation for continued institutional cooperation. Excess Liquidity … cont’d Government borrowings of Rs 4 bn already frontloaded to mop up excess liquidity MOFED will shortly issue additional Rs 2 bn of 5-Year Bonds [fixed coupon rate of 6% p.a. and Inflation Index-linked] on a retail basis Opportunity for small savers to get higher return on their savings Provide full protection from inflation Global Economy Momentum in global economic recovery less strong than