Mauritius central bank holds repo rate steadyBy LINLEY BIGNOUX in Mauritius | Wednesday, June 20  2012 at  11:36

Mauritius' central bank has decided to keep its key Repo Rate unchanged at 4.90 per cent as the government said it was cautiously optimistic of the outcome of the Euro debt crisis.

Nursing the Mauritian Rupee amidst global economic uncertainty is a top economic priority, the government said.

The repo rate is that which the Bank of Mauritius repurchases its securities from commercial banks to control money reserve and supply.

But with the elevated insecurity in the global economic climate and most certainly in Europe, the country's Monetary Policy Committee says it will robustly monitor economic and financial developments in Europe and their potential impact on inflation.

Bank of Mauritius forecasts say that the growth thrust for the economy is expected to be optimistic, but may however be unresponsive in the future pending how the crisis in its key exports markets of the EU and the UK pans out.

According to MPC members, the Mauritian economy is functioning below par presently, but they paint a brighter picture over the next 12 months, although a recent downturn in hotel occupancy, rates and tourist arrivals into the country have been a concern for the highly-tourist dependent economy.

If the risks in the euro zone are contained, domestic growth in 2012 will reach 3.8 per cent and is likely to stay unchanged from the projection made in late March by the country’s central bank.

But the MPC warns that the country is already highly exposed to European market downturns through foreign investment vehicles into Mauritius.

The bank says that it will roll out further measures to minimise the exchange rate risks faced by the export sector, with their knock-on effects on banking.

Domestic year on year inflation will reach just under five per cent while headline inflation, adjusted through the CPI Consumer Price Index, is forecast at 4.5 per cent by the end of the year.

Mauritian economists have recently told local media that the volatility of food and energy prices should be accounted for in the growth projections and when determining the repo rate via the Consumer Price Index to get a better growth projection.