In its recent media release issued on 11 January 2023, the Bank of Mauritius (BOM) informed the public of the introduction of a new Monetary Policy Framework (MPF) effective from 16 January 2023 which replaces the former monetary policy framework set up in December 2006.
By way of a further publication on 13 January 2022, the BOM explained that the decision to introduce the new MPF was crucial to address the deficiencies of the present framework in view of the constantly changing economic and financial conditions and to:
- enhance the monetary policy transmission mechanism; and
- strengthen the effectiveness of monetary policy.
The new MPF seeks to, inter alia:
- keep relying on a key policy interest rate to maintain economic variables and expectations under control; and
- focus on key operational and strategic elements such as having a clearly-defined and flexible inflation target.
The key policy rate pursuant to the new MPF will now be the ‘Key Rate’, effectively replacing the ‘Key Repo Rate’. The BOM has set the Key Rate at the same level as the Key Repo Rate, currently at 4.5%, and further stated that the new Monetary Policy Committee will continue to determine the level of the Key Rate in line with inflation and the country’s growth outlook.
It is also worth noting that the Code Civil Mauricien (Rate of Interest) Regulations 2017 has been revoked and replaced by the Code Civil Mauricien (Rate of Interest) Regulations 2022, which now pegs the rate of interest applicable to damages, with the Key Rate.
The banking and finance practice of our Mauritian office was mandated by a leading commercial bank (the Bank) to assess and advise on the impact that the above change will have on (a) the Bank’s facility agreements (to its existing clients and staff); and (b) on the ensuing security packages.
Our Mauritian office further assisted on the preparation of the relevant notification by the Bank addressing the impact of the change in the key policy’s interest rate.
