market. central banks and governments share the responsibility to facilitate and promote the development of local bond markets, remove market friction and unnecessary restrictions, and provide an environment that is conducive to both supply and demand, that is to both the issuers and investors. bond market development has been targeted by the central bank over the past years through various initiatives. this included the establishment of an appropriate market infrastructure that facilitates costeffective and secure trading, and a transparent price discovery process. with regard to secondary market development, you all know that we set a secondary market cell within the bank in 1994. we established a primary dealer system in 2002. treasury bills have been listed on the stock exchange of mauritius since 2003. we have re - introduced sales of treasury bills and treasury notes at the counters of the bank of mauritius last july. the deepening of local currency bond market across a range of maturities will encourage increased participation by institutional investors. we have started issuing medium – to long – term bonds on a more regular basis to develop a benchmark yield curve for government securities across the whole spectrum. this will facilitate the development of a corporate bond market. in 2007, the european investment bank, with the state bank of mauritius and west lb from south africa as lead managers issued synthetic mauritian rupee debt in the international market. we are now considering a proposal from the world bank for the government to allow them to issue mauritian rupee denominated or linked bonds in the end, however, there is only so much that the authorities can – or should – do. whilst these initiatives add up to the necessary conditions for market development, they are unlikely to prove sufficient on their own. however good the infrastructure may be, it is for the players themselves, that is the issuers, investors and the financial intermediaries to eventually determine the shape and size of the market. it is also of paramount importance that market players adopt a participative approach for the development of the money market, as the existence of trading limits are impeding the development of these markets. allow me now to dwell a little on the challenges that a small country like mauritius is currently facing in the conduct of monetary policy. today, the bank of mauritius finds itself confronted with the important challenge of reducing the rate of inflation, which stood at 9. 0 percent at the end of february 2008, and preserving the competitiveness of the export - oriented sectors. and we must meet this challenge against a backdrop of unprecedented capital

rundheersing bheenick : local currency bond trading and risk management opening address by mr rundheersing bheenick, governor of the bank of mauritius, at the workshop on local currency bond trading and risk management, organized by the financial markets association of mauritius, balaclava, 24 march 2008. * * * it is a great pleasure for me to address you this morning at the opening of this workshop. i consider the theme which you have chosen “ local currency bond trading and risk management ” quite topical at this juncture of the development of our domestic financial market. i salute the initiative of the financial markets association and i would also like to add my own welcome to our resource person, dr graeme west. i understand that this is the third workshop organized by the association after those held in 2003 and 2006 which focused on treasury and risk management, and derivatives, respectively. do i detect a slight increase in frequency here? does this reflect the quickening pace at which things are happening in the financial sector these days? be that as it may, such workshops help to enhance the skills of participants and enable them to keep up with the continuous innovations that characterize the changing financial landscape. skilled professionals and technicians are at the root of all innovations. a well - functioning bond market will help to create more growth and stability, not only in mauritius, but also in the region. as we all know, a deep and liquid bond market is a key component of a thriving financial centre. an efficient and mature bond market contributes directly to macroeconomic and financial stability. it constitutes an alternative source of funding which can help the corporate sector to reduce over - reliance on short - term foreign currency loans. currently, in the absence of a properly functioning local bond market, issuers who qualify for bond financing must have recourse to international financial markets to finance their local projects and have to bear the attendant exchange rate risk. local currency bonds can thus help to protect such issuers from foreign currency shocks. the improved financial intermediation resulting from an active bond market also brings such microeconomic benefits as efficiency gains and diversification of tools for both borrowers and savers. let me reaffirm that, as a trusted partner in economic development, the bank of mauritius is committed to promoting the development and efficiency of all markets, whether the foreign exchange market or the domestic money market and we keep a watchful eye on the stock market and other asset markets. we see a need to add greater depth to the