yandraduth googoolye : the role of central banks in encouraging investment in housing address by mr yandraduth googoolye, first deputy governor of the bank of mauritius, at the annual conference of the african union for housing finance, flic en flac, 11 september 2013. * * * ladies and gentlemen a very good morning to you all. it gives me great pleasure to participate this morning in this annual conference of the african union for housing finance ( auhf ), being organised in collaboration with the mauritius housing company ltd ( mhc ). home ownership is one of the major aspirations of an individual. today, owning a house not only means having a shelter for the family. the house is a real asset that probably represents the largest investment undertaken by an individual during his lifetime. such a large sum of money may not initially be readily available for the average individual. it is primarily in this context that housing finance has been linked to the grant of credit facilities by banks and other mortgage institutions. investment in housing can be seen from different viewpoints. for a government interested in fulfilling its social mandate of facilitating access to decent housing for low - to middle - income families, the problem is finding the necessary resources to carry out public housing programs. let me set an aside here to dwell for a minute on the experience of mauritius where the government set up as early as 1963 an organism geared towards the provision of social housing. this organism evolved into the mauritius housing corporation ( mhc ), which is today the only finance institution – both in mauritius and rodrigues – that caters exclusively for the promotion of home ownership and the provision of housing finance. since july 2001, the mhc has been authorised to conduct deposit - taking business to finance its activities and is accordingly under the regulatory purview of the bank of mauritius. over the years, the mhc has been innovative. in addition to credit granted for housing projects, the company also provides architectural, technical, legal, insurance services, and accept deposits primarily for the purpose engaging the general public in savings for homeownership. more of this will be provided by the managing director of mhc. coming back to my main point, investment in housing, from the perspective of the household, is very often linked to the possibility of obtaining a loan at affordable terms. for the bank manager considering whether to grant a loan, the problem is how to expand the scope of financial services while managing risks appropriately. finally, from the

one. a lasting solution to long - term competitiveness depends not on exchange rate changes but on productivity growth. short - term exchange rate accommodation can only serve to postpone the need to address the real issues relating to restructuring, good management and productivity improvement. any attempt to rescue employment in the export processing zone through the depreciation of the rupee cannot but be a temporary one. finally, let me reassure firms in the export processing zone that the bank of mauritius will continue with the pursuit of a monetary policy stance that does not jeopardize the maintenance of low and stable inflation keeping in view certain short - term considerations. the monetary scene in mauritius today does not at all support the view that the economy is in a state of ‘ fundamental disequilibrium ’. there is no precise definition of ‘ fundamental disequilibrium ’. the imf has a working definition to judge whether or not an economy is in a state of ‘ fundamental disequilibrium ’. of the six broad criteria that define the presence of fundamental disequilibria in an economy none of them is palpably present in the current state of the mauritian economy. instead, mauritius is for the first time in its history recording four successive years of current account surpluses in its balance of payments. the overall balance of payments surpluses are significant. the foreign exchange reserves position of the bank of mauritius has attained unprecedented level. inflationary pressures in the economy are contained. inflation is on a declining trend. although the rupee has in the past months appreciated against the us dollar partly due to the surpluses generated in the current account of the balance of payments there is no evidence that the exchange rate is mis - aligned. the bank of mauritius is pretty conscious that persistent appreciation of the rupee over a protracted period of time could potentially lead the economy to a state of ‘ fundamental disequilibrium ’. while guided principally by the objective of sustaining low and stable inflation, monetary policy will continue to strike the desired balance between short - term and long - term considerations in the best interest of the economy. once i likened the conduct of monetary policy to drawing a heavy paperweight with a piece of elastic – either the heavy paperweight does not move or it flies across the table and hits you in the face. this analogy seems closer to reality than the organized sound - biting criticisms. i wish you well. thank you.