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Bank of Mauritius introduces Support Programme, accompanies Local Economic Operators in COVID-19 Context

The Bank of Mauritius has been closely monitoring the outbreak of COVID-19 and its plausible economic impact on the banking sector and the Mauritian economy.

A constant dialogue has been established with the Mauritius Bankers Association and all stakeholders with a view to discuss and assess the situation caused by what has now evolved into a pandemic. The focus, at this crucial stage, is preeminently on how the Bank of Mauritius can help economic operators safeguard jobs, alleviate cash-flow problems and ensure business continuity.

The Monetary Policy Committee of the Bank of Mauritius reduced the Key Repo Rate (KRR) by 50 basis points to 2.85 per cent per annum. The decision for such an accommodative monetary policy was mainly prompted by the will to bolster domestic economic activity.

To further assist Mauritian businesses across all economic sectors, the Bank of Mauritius is introducing a support programme containing five key measures.

1. Special relief amount of rs 5 billion:

a. The Bank of Mauritius is introducing a Special Relief Amount of Rs 5.0 Billion through commercial banks to meet cash flow and working capital requirements of economic operators which are being directly impacted by COVID-19.

b. This Special Relief Amount will be made available, through commercial banks, from the 23rd of March 2020 up to the 31st of July 2020, to all sectors of activities impacted by COVID-19, including SMEs.

c. Disbursements will be effected through commercial banks and the Bank of Mauritius is capping interest on these advances to impacted economic operators at the fixed rate of 2.5 per cent per annum.

d. There will be a moratorium of six months on capital and interest repayments, with the loan repayment period being two years.

e. Impacted operators are invited to contact their respective commercial banks.

2. Reduction of cash reserve ratio:

a. The Bank of Mauritius is reducing with immediate effect, until further notice, the Cash Reserve Ratio applicable to commercial banks from 9 per cent to 8 per cent.

b. This reduction is a key measure that aims at supporting banks to further assist businesses which are being directly impacted by COVID-19.

c. The amount released through this cut will be held in a special account at the Bank of Mauritius and will allow commercial banks to use these particular balances for any facility to be granted to any impacted economic operator

3. Moratorium on capital repayment for loans

a. Commercial banks will provide a moratorium of 6 months on capital repayment for existing loans for economic operators that are being affected by COVID-19.

4. Easing of banking guidelines

a. The Bank of Mauritius has put on hold the Guideline on Credit Impairment Measurement and Income Recognition, which was effective since January 2020.

b. This decision has been taken to allow commercial banks to continue supporting enterprises facing cash flow and working capital difficulties in the context of COVID-19.

5. Issue of a 2020 savings bond

a. The Bank of Mauritius is introducing a 2.5 per cent Two-Year Bank of Mauritius 2020 Savings Bond for an amount of Rs 5.0 Billion from 23rd of March 2020.

b. The Bond will be issued at par in multiples of Rs 25,000 to individuals who are Residents of Mauritius and up to a maximum cumulative investment amount of Rs1,000,000 per investor, whether singly or jointly, and to locally registered Non-Governmental Organisations running on a non-profit making basis for the same maximum investment amount of Rs 1,000,000.

c. This measure aims at further assisting depositors to diversify their savings portfolio.

d. Sale of the Bonds will be effected through all commercial banks as per the terms and conditions of the relevant prospectus.

In the light of the evolution of the economic context, the Bank of Mauritius stands ready to take any additional appropriate measure to maintain the stability of the financial system and mitigate any adverse impact on economic growth and development, consistent with its statutory responsibilities. The Bank of Mauritius, together with the MBA, will follow closely the progress and response of commercial banks to these measures.

It stresses on the need, now more than ever, for all stakeholders to work together, to seamlessly exchange critical information and to coordinate mitigating measures for a most effective implementation of strategies deemed appropriate in the best interests of the country and its people.

The Bank of Mauritius

Bank of Mauritius was established in 1967. Since then the bank has been operating with an objective of safeguarding the internal and external value of the currency and to achieve a higher economic growth through suitable monetary policies.

It also oversees financial institutions to determine their soundness, stability and their compliance with governing laws, rules and regulations which is governed by the Bank of Mauritius Act 2004.
The Bank of Mauritius has authorised four non-bank financial institutions to carry on deposit-taking business.

The basic objectives behind the Banking Act 2004 are to maintain a sound banking system in Mauritius and protect the interests of depositors and creditors. The Bank of Mauritius was modelled on the Bank of England and was, in effect, set up with the assistance of senior officers of the Bank of England. Amongst its responsibilities is the issuance of the Mauritian currency, the Mauritian rupee.

The Central Bank of Mauritius decided unanimously to slash its key repo rate by 50 bps to 2.85 percent during its March 2020 meeting. Policymakers intend to support domestic activity as the coronavirus outbreak is expected to have a significant impact on consumer and business confidence, which can potentially dent domestic spending and investment.

Mauritius can give itself a pat on the back for giving its citizens a high level of access to banking facilities, as the island economy boasts the highest level of financial inclusion in the Southern African Development Community (SADC).

A whopping 90% of adults aged 18 years and above in Mauritius enjoy access to financial services, according to the FinScope Consumer Mauritius 2014 survey.

Mauritius has a relatively large and well-developed domestic financial system and a growing offshore sector. Mauritius belongs to a select group of developing countries where domestic bank assets represent approximately 100 percent of GDP, and contractual savings exceed 40 percent of GDP. Lending Rate in Mauritius averaged 9.73 percent from 1998 until 2019, reaching an all time high of 13 percent in September of 1998 and a record low of 8 percent in March of 2004.

Mauritius has successfully diversified into different economic sectors such as textiles, tourism and financial services. According to World Bank’s 2012 Doing Business report , Mauritius ranks first among African economies and 23rd worldwide in terms ease to carry out business.

Mauritius has a solid reputation of an investor’s friendly and open country offering predictability, stability, protection of investors and attractive investment opportunities across various sectors. In addition to being a business-friendly and well-regulated centre it offers a low tax jurisdiction with an extensive tax treaty network.

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