Mauritius central bank taken to task by IMF

The International Monetary Fund (IMF) on Saturday said the Bank of Mauritius needs to buckle up in its role in the stability factor in the country’s economic development.

It said the central bank needs to clarify its monetary policy to increase coherence.

The IMF said also that the primary objective of the central bank was to maintain price stability and promote “orderly and balanced” economic development.

“There appears to be no consensus on the definition of price stability and on the role of the nominal exchange rate in the conduct of monetary policy,” the fund said.

It said the perceived multiplicity of objectives can risk overburdening monetary policy, spur policy inconsistencies, and potentially undermine the central bank’s ability to anchor inflation expectations.

“Announcing a medium-term inflation objective will prove instrumental in the implementation of a new policy framework.

“An inflation objective of about three per cent could serve as the foundation for the BOM’s (Bank of Mauritius‘s) policy actions and communication,” the IMF said.

The Indian Ocean island nation is trying to diversify its economy away from sugar, textiles and tourism into offshore banking, business outsourcing, luxury real estate and medical tourism.

The macroeconomic outlook is broadly positive, but vulnerabilities are merging.Economic activity is expected to remain robust, driven by the government’s ambitious Public Investment Program, and supported by continued dynamism in the tourism sector and financial intermediation activities.

While headline inflation is expected to recede in the second half of 2017, it is likely to finish the year around 4.0 percent under current policies. The main sources of risks to the outlook include further slowing of manufacturing exports and the pace of implementation of the PIP, said the IMF.