The new governor of the Bank of Mauritius intends to restore the integrity of the institution, after the irregularities committed by the former administration. Rama Sithanen, in office for a month, appointed after the November legislative elections, is closely examining the accounts of a private subsidiary, created by the Central Bank during the Covid pandemic.
From our correspondent in Port-Louis,
In June 2020, in the context of the pandemic and to support businesses in difficulty, the Bank of Mauritius created the Mauritius Investment Corporation. This entity, poorly perceived by the IMF, aimed to support companies in difficulty. However, some would have taken advantage of it to line their pockets or favor industrialists close to the former political power.
This private subsidiary had a fund of 2 billion dollars, the origin of which, however, was unclear. The new governor of the Bank of Mauritius provided clarifications on this subject, one month after taking office.
« Very good economists still say that the Bank of Mauritius converted 2 billion dollars to obtain 80 billion rupees. This is not the case at all, says Rama Sithanen. This is simple monetary creation. I can assure you that the Central Bank has not carried out any currency conversion. Money was created electronically, with a single keystroke ».
Money creation caused inflation and depreciated the rupee. In principle, Mauritian economists consider this measure as a solution of last resort, a quick fix to save industries during the pandemic. However, the terms of the $2 billion fund raise questions. Is it really the role of a Central Bank to create a private entity like the Mauritius Investment Corporation? Should it carry out private operations such as investing in real estate, buying stocks and issuing bonds?
« This is to dilute the role of the Bank of Mauritius »
The new governor of the Central Bank has his opinion on these subjects: “ There was a particular context which justified intervention by the Central Bank. However, I'm not convinced that investing in real estate or stocks are among its core missions. This is to dilute the role of the Bank of Mauritius. However, its main mission is price stability, the financial health of the country, the value of the rupee and balanced economic development. ».
Last May, the IMF recommended that the Central Bank of Mauritius disengage from this controversial private entity. For their part, Mauritius' new political leaders are tight-lipped about the unorthodox methods of the former Bank of Mauritius administration, citing banking secrecy and preserving Mauritius' image.
« What went wrong is that the Bank of Mauritius, which should be carrying out monetary expansion, used very opaque means, not transparent at all, to print money and use this money to favor cronies and unviable industries », Estimates economist Kee Chong Li Kwong Wing. As a result, the accounts of the Bank of Mauritius have deteriorated and, according to experts, require recapitalization. At the same time, the Bank contacted the competent authorities to investigate potential financial embezzlement committed by the former administration.
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