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October 2022: Gross Official International Reserves Stood At USD 6,507.7 Million, 13.5 Months Of Imports

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Central banks around the world have begun reporting large losses in recent months as they wind down pandemic-era bond-buying programs, while also rapidly raising interest rates to combat high inflation. Experts don’t expect these losses to impact the conduct of monetary policy.

The latest balance sheet of the Bank of Mauritius (BoM) indicates that the Bank has a Total Comprehensive Loss of Rs 11 billion. There has been a lot of misreporting about this loss, which has nothing to do with the day-to-day account of the Bank.

Comprehensive income is the sum of net income and other comprehensive income. If the result is negative, your company has a comprehensive loss for the period. Other comprehensive income arises from non-operational gains and losses you have yet to recognize because the underlying transactions are still open.

Central banks are not commercial banks. They do not seek profits, nor do they face the same financial constraints as private institutions. In practical terms, this means that most central banks could lose enough money to drive their equity negative and continue to function completely successfully. For most central banks, one must construct a scenario under which they might have to compromise their policy objectives to keep paying their bills. The problem is that not everyone appreciates that a central bank’s accounting equity can be negative without any reason for alarm bells to ring. Markets may instead react badly in the false belief that losses imply a loss of policy effectiveness.

Gross Official International Reserves comprises the gross foreign assets of the Bank of Mauritius, which include holdings of assets in the form of monetary gold, SDR and other reserve assets, the country’s Reserve Position in the IMF as well as the foreign assets of the Government. The GOIR statistics are disseminated monthly within one week after the end of the reference month, as set out in the Bank’s Advanced Release Calendar. This reserve is managed by 7 TR1 assets managers tp generate returns. They also purchase assets to value.

The country’s Gross Official International Reserves (GOIR) amounted to Rs286.8 billion (equivalent to USD6,507.7 million) at the end of October 2022. Based on the imports of goods and services for calendar year 2021, the GOIR represented 13.5 months of imports as at end-October 2022. Most of our African partners only have reserves for three months import.

March 2020, the world was hit by the pandemic, the markets fell, values of shares all over the world fell. Next year, all sets to be different with most country’s economies picking up.

Because of the COVID-19 pandemic, the Bank of Mauritius (Bank) had announced in May 2020 a one-off exceptional contribution of Rs 60 billion to Government in line with section 6(1) (oa) of the Bank of Mauritius Act to stabilise the economy.

(i)   An amount of Rs32 billion has been written off from the Special Reserve Fund;

(ii)   The remaining balance of Rs28 billion is being treated as advance against future profits distributable to Government.

The above treatment has been made in line with consultations with the Technical Assistance Mission of the International Monetary Fund (IMF).

The Bank of Mauritius (Bank) has set up the Mauritius Investment Corporation Ltd (MIC) as a Special Purpose Vehicle under its aegis.

The Bank has come up with this initiative following extensive consultations with major economic and systemic operators in the tourism and manufacturing sectors. The objective of the MIC is to mitigate the contagion of the ongoing economic downturn to the banking sector, thus limiting macro-economic and financial risks.

The MIC, an innovative people-centric initiative, also aims to secure and enhance financial wealth for current and future Mauritian generations while ensuring the banking sector’s stability. And it seems some of the companies, who have received help from MIC, are starting the repayment.

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