The Bank of Mauritius was established in September 1967 as the Central Bank of the country. It was modeled on the Bank of England and was, in effect, set up with the assistance of senior officers of the Bank of England.
The setting up of the Bank of Mauritius marked the beginning of a new phase in the monetary history of Mauritius, with the monetary system moving forward from the stage of ’Sterling Exchange Standard’, under which currency was issued in exchange for sterling at a fixed rate of exchange, to that of a ’managed currency’ in which the discretionary role of the monetary authority becomes important.
Objectives of the Bank
The Bank has been set up as the authority which is responsible for the formulation and execution of monetary policy consistent with stable price conditions. It also has responsibility for safeguarding the stability and strengthening of the financial system of Mauritius.
The Bank of Mauritius Act 2004 stipulates that the primary object of the Bank shall be to maintain price stability and to promote orderly and balanced economic development.
The Bank of Mauritius has introduced a new framework for the conduct of monetary policy in December 2006. In this new framework, the Bank will use the Repo Rate instead of the Lombard Rate as the key policy rate to signal changes in its monetary policy stance. The Bank will set the Repo Rate and will regulate the supply of reserve money such that the overnight interbank money market interest rates move close to the Repo Rate. As has been the practice with the Lombard Rate, the Bank of Mauritius will issue a communiqué to explain its decision on the Repo Rate.
Functions of the Bank
The main functions of the Bank include:-
- Formulation and implementation of monetary policy
- Issuer of currency
- Banker to the Government and to banks
- Provider of an efficient payment, settlement and clearing system
- Management of the public debt
- Management of foreign exchange reserves
- Regulator and supervisor of banks
- Adviser to the Government on financial matters.
Since the establishment of the Bank of Mauritius, the Mauritian economy and the financial landscape of Mauritius have undergone considerable changes. Exchange control was completely abolished in July 1994. The exchange rate of the Rupee is determined by market forces. Interest rates are freely determined on the market. Direct credit control which served its purpose in the old days is no longer an instrument of monetary control.
In short, the Bank of Mauritius has moved away from a system of direct monetary control to an indirect method of monetary control. The functions of monetary management and the regulatory as well as the supervisory role of the Bank of Mauritius are intertwined, more so as the country has been increasingly integrated with the world economy. Against this backdrop of changes within the Mauritian financial system as well as those in the world financial system, the conduct of monetary policy and the regulatory and supervisory role of the Bank of Mauritius have become increasingly complex. The Bank of Mauritius is strongly committed to enhancing competition and efficiency in the financial system and ensuring its total integrity.
Last Updated on: 19-04-2010