decline in the price of betelnut and lower imported prices of food and fuel, supported by the appreciation of the kina exchange rate. underlying inflation as indicated by the exclusion - based and trimmed mean measures were 7. 7 percent and 6. 5 percent in the december quarter of 2011, respectively. these outcomes were lower than the forecast made in the september 2011 mps, despite the strong domestic demand associated with the png lng project and high government expenditures. the bank projects annual headline inflation for 2012 to be around 8. 0 percent, while trimmed - mean and the exclusion - based inflation are projected to be around 7. 5 percent. the forecasted headline inflation is lower than the 8. 4 percent average for 2011, due to the strength of the kina, lower imported inflation, and stable international food and fuel prices. the kina is expected to remain strong through 2012, mainly due to high capital inflows and export receipts. while this has the effect of lowering inflation, it can adversely affect the traditional export sector. on the other hand, firms must be fair in the conduct of their businesses by passing the benefit of kina appreciation through lower prices to consumers. inflation in png ’ s major trading partners eased in the second half of 2011 and is expected to pass through to domestic inflation in 2012. food, in particular cereal, and fuel prices dropped in the second half of 2011, though both have increased slightly in the first few months of 2012. however, inflationary pressures still prevail, attributable to domestic demand pressures arising from the ongoing construction of the png lng project and subsequent increase in business activity in 2012, and increased private and public spending in relation to the national elections. the elections will also increase the transactions demand for money. bis central bankers ’ speeches supply - side shocks in early 2012, attributable to bad weather and subsequent damage to agricultural output and transport infrastructure are also expected to contribute to inflation. for the medium term, headline inflation is projected to be around 7. 5 percent in 2013 and 7. 0 percent in 2014. these projections are based on a number of factors including the winding - down of the construction phase of the lng project in late 2013, the continued strengthening of the kina and easing global demand ( see chart 1 ). there are upside risks to these projections, including higher domestic demand and associated inflation expectations by firms due to the png lng project, any substantial increase in food and fuel prices

mobile banking giving access to banking services to needy segments of the population in villages throughout the country. the mobile bank is today a legacy. bank of baroda also made significant contributions towards financial literacy and commercial education. a couple of years later, habib bank joined the bank of baroda in this mission, followed by the state bank of mauritius ltd. a centenary bank has past successes. however, it cannot afford to be complacent about its success stories. a centenary should also be an occasion to look at challenges ahead. the world today is fiercely competitive. innovation, creativity and re - engineering should be on the business agenda of our banks. our banking sector should be always on its toes and tap new markets. the banking sector will be faced with stronger competition by the end of this year with the opening of three new banks, which have been granted banking licences last year. also, as part of the outfall of the honourable prime minister ’ s visit to china, we expect a chinese bank to be part of our financial landscape before long. the sector is becoming more and more competitive and consumers can only stand to gain in this process. as the regulator and watchdog of the banking sector, we at the central bank shall keep an eye on developments to ensure that credit standards are not lowered, that depositors ’ interest are safeguarded and that our reputation as an international financial centre is not at risk. our consumers expect no less from its central bank. mauritius enjoys cultural and economic ties with asia and africa and offers huge potential for the provision of banking services in the region. i strongly urge our banks to take full benefit of opportunities that lie ahead. islamic financial services are being introduced. in this context, i will shortly be meeting with the islamic financial services board of malaysia to discuss the adherence of the bank of mauritius to this international standard setting body comprising regulatory and supervisory agencies worldwide which have interest in enhancing the soundness and stability of the islamic financial services industry. i believe that the time is now right to envisage a suitable currency exchange system between our two countries. there has been significant expansion in trade and tourism between india and mauritius. i understand that around 50, 000 tourists from india are expected to visit mauritius this year and that 20, 000 mauritians would have travelled to india. this measure will avoid the inconvenience for travellers having to convert their indian rupee banknotes into a foreign currency first when travelling to mauritius and secondly, to reconvert them into