Rundheersing Bheenick: Unlocking our potential in these uncertain
times...
Letter by Mr Rundheersing Bheenick, Governor of the Bank of Mauritius, to stakeholders,
Bank of Mauritius, Port Louis, 28 February 2014.
* * *
The original speech, which contains various links to the documents mentioned, can be found on the Bank of
Mauritius' website
1. The year 2013 saw the Bank scoring many "firsts," reaching new "highs," and
establishing new records. We sharpened our focus on financial stability and macroprudential
policy. It was also the year that marked the start of my third mandate as Governor, this time
without any hullabaloo. I view this mandate as a vote of confidence in my stewardship of the
Bank and would wish to take this opportunity to lay out the platform for taking the Central
Bank and, by implication, the economy to still greater heights. Successfully tackling the
challenges ahead does not rest on my shoulders alone, but depends crucially on the support
of public policy-makers, Bank staff, and private stakeholders.
2. My personal experience at the helm of the Bank has been filled with ups and downs
and I expect the third mandate to be no different on this score. Anybody hankering for a quiet
nine-to-five life, five days a week, would be well-advised to stay well-clear of the shoes of a
Central Bank Governor. Faced with the continual global economic uncertainty, I had to focus
my efforts on maintaining domestic macroeconomic stability. Our achievements speak for
themselves. Our failures generated substantial public scrutiny and media coverage.
However, out of every failure comes a lesson and we have learnt our lessons over time.
3. The Letter to Stakeholders now forms part of our regular calendar and its release
is eagerly awaited. We see it as part of our communication strategy to inform, enlighten, and
explain.1 We share our successes and failures sans états d'âme or chest-beating. At the start
of my new mandate, I would also like to extend the traditional Letter to Stakeholders by
sharing my personal strategic vision for the Bank and the economy. I hope that this provides
food for thought for our public policy-makers, private sector operators, and decision-makers
to better extend our footprints in the region and to better position the country globally.
4. The letter is structured as follows: Part I provides the context of domestic and global
developments and gives a brief overview of trends in monetary policy. Part II focuses on
some areas of concern, listed in the text below, and readers seeing this on the website can
navigate to the issues of interest to them. Part III highlights the main developments of the
past year. Keeping in line with past practice, issues are discussed in greater detail in the
links at the end of the relevant paragraphs. As a departure from my previous Letters, details
on operational developments are provided in the Annex and a Box is devoted to the Ponzi
outbreak that threatened to rock the financial sector in the early part of the year. Part IV
presents some other highlights of the year, not captured elsewhere, such as regional
cooperation and the close association of the Bank in the work of the Financial Stability
Board. Part V concludes.
I. Context
5. Domestic developments. National accounts data over the last few years provide
abundant evidence that our economy has gradually lost steam. Targeting the high GDP
growth rates achieved in the 1970's is mere wishful thinking today - unless complex
structural adjustments are first made to very many areas of our economic life. Back in the
1970's, our country had a reservoir of labour, together with access to preferential export
markets, and high saving and investment rates culminating in high growth rates. Long gone
are those days of sustained GDP growth rates above 5 per cent. Excluding the sugar boom
of the early 1970's, our natural rate of growth hovers around 4 per cent, which is a more
realistic benchmark in the absence of deep structural reforms. Our sources of growth are
qualitatively different from the growth drivers of most African countries; our human capital still
remains key to our progress. We have to live up to the fact that drastic changes are needed
and that we need to go beyond business-as-usual, undertake structural reforms, re-skill our
labour, raise more capital, step up our saving effort, enhance productivity and
competitiveness and accelerate diversification efforts.
6. A critical subject that I would like to highlight is the persistent rise of domestic credit
as a share of GDP in our economy. Over the last ten years, we have constantly surpassed
the credit growth rate of Sub-Saharan African countries and of small states generally. Credit
to households and the private sector topped Rs300 billion for the first time in December
2013, representing over 83 per cent of GDP. While we have not reached the notorious credit
growth peaks of Spain and Ireland, we are almost replicating the credit growth pattern of
Singapore, without, however, the decisive steps which Singapore initiated to curb excessive
leverage and cool property demand. This sustained increase in credit has gone hand-in-hand
with rising indebtedness, in the household as well as the corporate sector, and increasing
concentration of credit risk. As regulator, we had to take prudential measures to protect the
financial sector and the economy at large. We deemed it advisable to introduce a series of
macroprudential measures on loan-to-value ratio, debt-to-income ratio, sectoral limits and
additional provision for certain sectors to manage the budding risks.
7. One of my goals in my third mandate is to reinforce the resilience of the banking
sector and to foster its sustained growth. Regulators have learnt many lessons from the
global financial crisis, chief among which is the need to improve the monitoring, surveillance
and governance of financial institutions to guard against current risk as well as to prepare
them for potential future shocks. In 2013, we took determined steps to improve the regulatory
and supervisory landscape facing financial institutions and give it a more forward-looking
approach. We addressed a number of both micro- and macro-level issues. We issued
several new guidelines, and brought improvements to existing ones, to adapt the regulatory
framework to the evolving needs of the financial sector, and to bring it closer to international
best practice. As detailed elsewhere, we also enhanced our approach to off-site surveillance
and on-site inspection of individual institutions. There was considerable interest from new
players in gaining entry to the local banking sector; we received seven applications for a
banking licence in 2013. (More on this issue)
8. I must concede that we still have to cover some ground to de-risk our financial
system and add depth to the financial market. The Deposit Insurance Scheme, a special
bank resolution regime, an Ombudsperson for the sector, a National Payment Switch (NPS),
the introduction of Sukuks and cross-border resolution are some of the areas where we are
trailing well behind. Not because we at the Bank have been sleeping at the wheel, but mainly
because of lingering difficulties in securing the enabling legislation - except in one case,
where despite the appropriate legislative amendments, a key player has not modified its
behaviour to facilitate the objective which these amendments seek to further. I am mystified
by such foot-dragging on initiatives designed to increase the safety of our banking and
financial system. (More on this issue)
9. Global backdrop. At the global level, there was increasing evidence in the second
half of the year, of the recovery taking hold in some key economies, but little sign of a
takeoff as "escape velocity" continued to prove elusive. Lingering recession plagued the euro
area for much of the year with, however, a significant improvement in the major Eurozone
countries in Q4. Major emerging markets such as China and India slowed down. The deeper
recession in the euro area has had a particular impact on global growth: the downward draft
from weak balance sheets, depressed confidence, and low demand, worsened prospects for
export-led recovery for trade partners such as Mauritius. Tight fiscal and financial conditions
prevailed, with the spectre of a possible US debt-default arising from fiscal brinkmanship
adding to the uncertainty. Mid-year speculation about possible "tapering" by the US Federal
Reserve sparked increased volatility of capital flows which abated when "tapering" was
actually launched - a clear sign of market nervousness in conditions of extreme uncertainty.
10. Regulators are still striving to reform the regulatory framework to minimise the
likelihood of future financial crises and if they occur - as they surely will - to ensure that their
systemic impact is contained. The sheer amount of public money pumped into ailing banks
during the recent global financial crisis - either to bail them out, to avert collapse, or to
provide liquidity support - has compelled policymakers to find ways and means to limit
reliance on such recourse in future. Good progress has been made on rules on capital,
leverage, and liquidity for banks. But there is still much ground to cover on the reform
agenda. The implementation of new reforms has been uneven across countries worldwide
and remains a challenge, especially as the pressure to reform has abated as the crisis has
receded further in the past.
11. Financial institutions guilty of delinquency during and after the financial crisis are
being pinned down by regulators. Banks have had to dig deep into their pockets to pay hefty
fines for such offences as manipulation of the London interbank offered rate, Libor, rigging
foreign exchange markets, and collusion among banks to undermine a government
programme as in Hungary. Bank executives, directors, and traders have been fired or jailed.
Regulators are becoming unyielding in bringing offenders to justice. Over time, it is expected
that banks and other financial institutions will have to improve their internal controls to
prevent irregularities and improper behaviour.
12. Trends in global and domestic monetary policy. The recent years of global
economic mayhem have put monetary policy to a severe test. Central bankers everywhere
have been scratching their head, reflecting on the ideal approaches to monetary policy
formulation in the post-Global-Financial-crisis era. Faced with tough monetary policy
dilemmas, many large central banks, grappling with the zero lower bound, resorted to
"forward guidance" as an additional tool in their arsenal, with a focus on signalling their
monetary policy intentions through an enhanced communication strategy. The prolonged
period of ultra-loose monetary policies around the world brought to the forefront issues such
as asset price bubbles, volatile capital flows, dollarization, and imported instability. The twists
and turns of monetary policy in major economies have rocked the boat for smaller central
banks, pushing them in uncharted waters, and forcing them to intervene to combat currency
appreciation that threatened to throw their economies out of kilter if left unchecked.
13. Such has indeed been the case for Mauritius, where the situation is further
complicated by two idiosyncratic factors. First is the entrenched divergence of opinion among
Monetary Policy Committee (MPC) members, which surfaced during the year, pitting Bank
executives against "external" members. Unlike the situation in most developing economies,
our MPC comprises a majority of external members who outnumber the Bank members 5-3.
A second issue is the raging controversy around growth versus inflation, with the Bank
resolutely sticking to its last and not allowing itself to stray from its core mandate of price
stability. Mercifully, the vociferous calls from some policy quarters and interested exporters'
lobbies for currency depreciation, which engulfed the Bank in the first half of 2012, were no
longer heard. The voting pattern in the MPC inevitably weighs on the overall credibility of the
monetary policy decision-making process. The time is ripe for a review of legislation to give
the Bank operational independence in the formulation and implementation of monetary policy
as is the case not just in most developing economies, but also in a number of major central
banks, including the US Federal Reserve, the European Central Bank, the South African
Reserve Bank and even the Bank of Japan.
14. An acid test for a central bank is the management of inflation expectations. Despite
the tussle at the level of the MPC, I am pleased to report that both inflation and inflation
expectations have stayed at low levels, giving the country a stable macro-economic
environment which has led, in turn, to a higher level of support for the Bank and its policies
among the wider population, notwithstanding much negative coverage in some parts of the
mainstream press and in business publications. A sustained communication strategy, with
increasing reliance on Open Mouth Operations, facilitated this outcome. However, the fight
against inflation is a continuing one. At 4 per cent year-on-year in December 2013, inflation is
far below the double-digit levels greeting me on arrival at the Bank in early 2007. We should
not lose sight of the fact that many of our peers, in the various regional groupings on the
continent to which we belong, are doing better on this score. The Association of African
Central Banks (AACB) had a target of 3 per cent meant to be achieved by 2012. SADC has
an inflation target of 3 per cent by 2013-2018 - which goes to say that we must step up our
efforts to bring domestic inflation even lower.
II. Areas of concern
15. Beyond Vision 2020 Vision 2020 was a futures exercise with a difference. It was
conducted in the mid-1990's. It sketched out a coherent view of likely future outcomes for our
society and our economy. Wide participation in the exercise led to broad ownership, which
facilitated our transition from an agricultural economy to a service-oriented and
knowledgebased economy. I believe that we must explore all avenues to enable the Mauritian economy
to avoid the middle income trap. Strategic planning is vital. We find ourselves in dire need of
long-term vision - just as we did in the early-1990's. Vision 2020 was led by the public
sector and drew on the support of academia, business leaders, opinion-makers,
nongovernmental organisations, and other stakeholders. Now, when the public sector is suffering
from limited planning capacity and expenditure constraints while, in parallel, the private
sector has burgeoned, I would encourage private sector organisations to take centre stage,
set up a think-tank and take the lead in fashioning a strategy and a vision for the country.
This will mark a new stage in our much-vaunted public / private sector partnership, that lies
at the root of our economic success, and will signal that the private sector has come of age
and is ready to look beyond self-interest to focus on the common good.
16. An adult approach to understanding monetary and fiscal policy. There has
been an open debate between the Bank and the Ministry of Finance and Economic
Development (MOFED) on several economic issues this year. Although I appreciate these
vivid discussions, I fear that there is a discernible tendency in the press and among other
economic commentators to blow some issues out of proportion, to fan dissension, and to
spread misunderstanding, raising misguided questions about the independence of the
Central Bank and the effrontery of an "unelected" Governor not heeding the wishes of
elected officials. The incontrovertible international evidence of superior outcomes from
independent central banks, with governors immune to short-term political pressures, is
occulted. There is a failure to appreciate what "coordination" between monetary and fiscal
policy means. In an ideal world, coordination would entail both parties working together for a
common goal. However, if all adjustments have to be borne by one side, then this can hardly
qualify as "coordination". Regrettably, much of the time, this has been the case for monetary
policy, where compromises were expected from the Bank.
17. Unfortunately - or fortunately, depending on where you stand on the issue - our
hands are bound by the statute setting up the Bank, with the result that adjustments cannot
come from the monetary policy side; and the Bank gets blamed unfairly for actually doing the
job for which it was set up in the first place! I would make an appeal for a better-informed and
more adult approach to understand the differing perspectives where coordination between
monetary and fiscal issues is needed. The Bank's monetary policy has been subject to much
criticism by economic agents and doubts were cast on whether we should not throw
overboard our IT-lite monetary regime in favour of - in the order proposed, and at roughly
one-year intervals - (i) pegged exchange rates vis-à-vis each of three major currencies of
export interest (which would have been quite a feat!), (ii) exchange-rate targeting and (iii)
nominal GDP-targeting. Predictably, the Bank resisted these calls - just as we had resisted
earlier calls from the IMF to move from our hybrid regime to a pure Inflation-Targeting
framework.
18. Rethinking our economic strategy. A rethinking of our economic strategy is
warranted in the light of the new global economic paradigm characterised by muted growth
prospects in our traditional advanced economy partner countries, combined with a slowdown
in growth momentum in emerging economies. I strongly believe that a rebalancing of the
economy, away from consumption and towards investment and exports, is urgently required
if we want to contain rising current account deficits, sustain strong growth, and graduate to a
high-income economy. While monetary policy through an appropriate level of the Key Repo
Rate (KRR), could contribute to a more balanced economy, it should be accompanied by
appropriate fiscal policies and supported by bold structural policies to raise productivity
across public and private sector enterprises.
19. New roles of central banks. Central banks have been responsible for cushioning
some of the financial damage arising from the disorderly financial and monetary conditions
triggered by the global financial crisis. However, this has come at a dear price, with central
banks' buffers dwindling and their fire-power compromised by the continued ultra-low returns
on their investment portfolios. Central banks in key economies have become the new
economic game-changers, taking the strain of propping up their financial sector and their
economies on their own balance sheets. The Bank has faced similar challenges and has not
been immune from some of the problems affecting its (bigger) peers elsewhere, such as the
US Federal Reserve, the Bank of England, the Bank of Japan, the Swiss National Bank, and
the Reserve Bank of India.
20. Restoring the health of the Mauritian economy is no longer the only item on the
agenda anymore, as the Bank's efforts to prop up the economy by combating appreciation
and absorbing liquidity have combined with negligible returns on its reserves to raise serious
concerns about the health of the Bank's balance sheet. Expansionary monetary policy has
recently been scrutinized by global fund managers and economists, who argue that the effect
of monetary easing is felt only by big corporations and ignores SME's. Some have gone even
further, declaring that in recent times, expansionary monetary policy might have been of
purely cosmetic benefit. Central banks such as the Bank of England and the US Federal
Reserve have launched initiatives to aid SME's, thus making their own policy decisions more
significant. With the advent of the crisis, it is normal that the roles of central banks changed
to tackle the issues in hand. Now that we are emerging from the crisis, there are increasing
calls for central banks to return to their core mandate and avoid taking on extra
responsibilities which they are ill-equipped to handle.
21. The continuing challenge of "negative carry" for the Bank's balance sheet.
Faced with a low interest-rate environment, compounded by heightened volatility in financial
markets - especially in the fixed income space where bank reserves are traditionally
concentrated - we have strived to generate a decent return on our reserve assets without
compromising on their safety. The Bank was trapped in a pincer movement of low-yielding
reserves and a rising volume of reserves. On the one hand, reserves continued to be
affected by the near-zero return on US- and Euro-denominated assets and by the significant
decline in gold prices in 2013. On the other hand, reserves increased as a result of our
actions, prompting the structural excess rupee liquidity in the banking system which was
showing disturbing signs of getting dangerously out of hand. We had no alternative but to
issue longer-term paper, in the form of 5-Year Bank of Mauritius (BOM) Bonds, in addition to
the BOM Bills and Notes which we have been issuing since 2010 to bring the excess liquidity
to a reasonable level. The "carry", that is the difference in yields between the rising volume of
reserve assets in our portfolio and the weighted yield on BOM paper issued to mop up
excess liquidity, continued to remain negative and currently stands at around 3 percentage
points.
22. The impact on the Bank's finances would have been even worse had we not
pursued a conservative diversification strategy in search of safe, liquid, and higher-yielding
currency assets. Because our statutory mandate as the international reserves manager of
the country is security, liquidity, and then return, - in precisely that order - we have been
constrained in terms of how much we could potentially expand the risk envelope in search of
higher yield. With revenues generated from external assets showing little upside, considering
the risk limits, and with the supply of Government paper remaining constrained, at least
partly because of greater recourse to foreign currency debt, the Bank has suffered rising
balance sheet stress. With the large volume of BOM paper outstanding at end-December
2013, the sterilisation cost is expected to reach Rs700 million in the coming year.
23. Danish debt management model. The transfer of the debt management function,
for both domestic and external debt to the Bank, was an initiative of MOFED and was
inspired by the Danish model. We did not, however, consider it appropriate to set up a
fullfledged Debt Management Unit within the Bank as this was not justified by the low level of
transactions and would have caused much duplication of work already done by other
Divisions at the Bank. The International Monetary Fund reviewed the current debt
management arrangements in December 2013. It identified some duplication in the work
done by the Bank and within MOFED, and has noted several inefficiencies. These will need
to be addressed, along with the obstacles preventing the development of a secondary market
for Government paper.
24. The problem of excess liquidity exacerbated by Special Funds. Large and
growing balances in Special Funds such as the National Resilience Fund, the Build Mauritius
Fund and the Road Decongestion Program Fund, all financed by Budget measures and
transfers, are creating difficulties for the Bank to achieve its objective of monetary and
financial stability. The Treasury places these funds with commercial banks, further inflating
the level of excess liquidity, and handicapping the Bank in the management of liquidity in the
banking system. To add insult to injury, the Bank's actions and authority were further
undermined by the Treasury effectively acting as a lender of first resort via the deployment of
these funds to cash-strapped commercial banks, which would otherwise have taken the
normal route of seeking accommodation from the Bank and enabled the repo rate corridor to
gain traction. I have complained against both of these practices as I believe that a Single
Treasury Account, placed at the central bank, does represent best practice and that it is
unhealthy for the single largest player on the financial market to frustrate the Bank by its
actions. We are now exploring the possibility of requiring a higher Cash Reserve Ratio from
Special Fund deposits in excess of transaction balances.
25. Dynamic provisioning - Too late in the game. At the core of the Bank's problem
lies a weak balance sheet. The combination of Operation Reserves Reconstitution (ORR),
embarked upon hesitantly - and, that too, only after securing a now-problematic agreement
to co-share the attendant costs with the Treasury -, open market operations at rising
volumes, and low yields on reserve assets, allied with a "negative carry", has proved lethal
for the Bank's finances. In a much-earlier letter, I had mentioned dynamic provisioning -
allowed by the Bank of Mauritius Act 2004, incidentally - as a mechanism for the Bank to salt
away some profits for the lean years ahead. We tried to apply this approach in July 2007 to
our profits for the Financial Year 2006/2007. At that time, we were clearly ahead of the game
- only to be charged with accounting trickery. Some will recall how the Bank was pressured
into reversing these provisions and distribute them as profits via a second dividend payment
in July 2008. Had the concept of dynamic provisioning then gained support from the Bank's
board and from the Treasury, the Bank would have been in better shape today and would
have absorbed sterilization costs reasonably well. It is too late in the game to hanker after
dynamic provisioning. I can only renew my call to the authorities concerned to help alleviate
the Bank's fragile balance sheet, and possibly draw some inspiration from Australia which
shored up the fire-power of its central bank by a massive injection of resources in the final
quarter of 2013.
26. Islamic banking products - On hold? Since 2007, we have taken a number of
initiatives to promote the development of Islamic banking in Mauritius, including the
establishment of an appropriate legislative framework for Islamic finance as well as
becoming a full member of the Islamic Financial Services Board and a founder-member of
the International Islamic Liquidity Management Corporation, both key institutions in
international Islamic finance. The Public Debt Management Act 2008 was amended to
provide for the issuance of Sharia-compliant instruments such as sovereign Sukuks by
Government. Unfortunately, the public debt issuance calendar has never provided for the
issuance of Sukuks, as proposed by the Bank in its capacity as debt adviser to Government,
and this severely compromises the prospect of our jurisdiction playing a bigger role in the
growing world of international Islamic finance. (More on this issue)
27. We are finalising preparations for the conduct of Commodity Murabahah
Transactions (CMT's) to provide Islamic Banking Institutions (IBI's) operating in Mauritius
with an instrument for liquidity management. The CMT's, to be conducted under the umbrella
of a Master Agreement, which will be finalised in consultation with the IBI's and the banking
industry, will extend the range of tools available to the Bank for the conduct of Open Market
Operations.
III. A year of measurable progress
28. Economy. The Mauritian economy maintained its positive growth momentum in
spite of soft external economic conditions in our main trading-partner countries, thus
maintaining its unblemished record of positive GDP growth throughout the global financial
crisis. GDP is estimated to have grown by 3.2 per cent in 2013. All the major economic
sectors recorded positive growth rates, with the exception of Construction and Agriculture.
Rigidities in the labour market, coupled with a growing structural skills mismatch, continued.
Female and youth unemployment remained matters of concern. First-time job-seekers were
not helped by generous salary increases which went into effect in the second half of the year.
Although downside risks to growth persist, mainly emanating from the uncertain recovery and
soft external demand for our exports of goods and services, with their knock-on effects on
subdued domestic private investment and consumer spending, there is some upside
potential with the Eurozone expected to emerge from recession in 2014. (More on this
issue)
29. Monetary policy. Recent MPC meetings have witnessed persistent divergence of
views on the appropriate monetary policy stance between, on the one hand, the three Bank
executives, and, on the other, the external members who predominate on the MPC. The
majority held the view that given what they perceived to be subdued inflation risks, monetary
policy should support growth and employment. My two Deputy Governors and I were in
favour of a small hike in the KRR to signal our concerns about inflation risks, and risks to
financial stability, stemming from a prolonged period of low interest rates in the country. We
thus saw a 25 basis points cut in June to 4.65 per cent after fifteen straight months on hold.
The cut was effected against a backdrop of rising inflation, from 2.9 per cent year-on-year in
January 2013 to 3.7 per cent in May, the latest data point available to the June MPC
meeting. We ended the year with year-on-year inflation at 4 per cent in December. (More on
this issue)
30. In my opinion, negative real interest rates - relative to saving deposit rates offered
by banks, typically 25-115 basis points below the KRR - have contributed to a significant
decline in the savings rate, given a boost to consumption leading to a sharp deterioration in
the current account deficit, and fuelled speculation in search of higher yield beyond the
safety of bank deposits. Little wonder then that Gross National Saving continued its
downward slide from 15.1 per cent of GDP in 2012 to 14 per cent in 2013. Low on-lending
rates have in turn induced growing indebtedness of the corporate sector, driven partly by
speculative investment in the property sector. The misallocation of credit has increased
vulnerabilities in the banking sector and the economy at large. Given such risks, we strongly
believe that the MPC should start normalizing interest rates.
31. Exchange rate policy. Stressed conditions on export markets sparked considerable
support for currency depreciation among exporters and their lobbyists, including the
cryptolobbyists embedded in different parts of the economic and financial establishment.
Consumers rarely get invited to the debate on the subject and their voices go unheard. We
thus tend to lose sight of the fact that Mauritius imports twice as much as it actually exports,
with food and fuel accounting for a major part of the import bill, which makes the exchange
rate a strong detonator for social unrest, if mismanaged. It is our responsibility to manage the
exchange rate in the best interest of all our countrymen, as provided for in the Bank's
statutes. We have held the view that supporting a narrow sectional interest, at the expense of
the wider public interest, is a matter of fiscal/industrial policy.
32. The year 2013 saw the Bank stepping up its intervention on the foreign exchange
market - we intervened on 238 days, that is, almost every working day, and successfully
transacted nearly 80 per cent of the time - to combat unwarranted appreciation not in line
with fundamentals, smoothe out volatility, and continue the ORR programme on which we
embarked in mid-2012. Have we succeeded in our objective of aiming for exchange rate
stability? The exchange rate statistics speak for themselves. At the start of my first mandate
as Governor in 2007, the rupee was under considerable pressure from speculative
transactions and over-borrowing, resulting in a volatile currency. I am happy to record that
our rupee did not suffer from the extreme volatility affecting most countries across all
continents, whether BRICS, emerging markets, or frontier economies, during 2013. In
SubSaharan Africa, our currency came second, behind the Botswana pula. I draw some
satisfaction from the fact that we have been able to stabilise the rupee. This is no mean feat
for a small open African economy, with euro-biased exports and dollar-biased imports.
33. Liquidity in the banking system. I have discussed earlier the factors underlying
the excess liquidity in the banking system. We continued with our efforts to mop up/sterilise
this veritable deluge of liquidity through the issuance of our own ins