rundheersing bheenick : review of the year gone by and reflections on the present and future outlook statement by mr rundheersing bheenick, governor of the bank of mauritius, port louis, 14 november 2013. * * * the financial year 2012 – 13 has been challenging for the bank as i had anticipated in my last statement, and we have continued to be tested by international and domestic pressures. the long - running financial crisis has now entered its sixth consecutive year. the global economy has remained under stress – the us witnessed timid growth, the euro area temporarily slipped into recession, the uk avoided “ triple - dip ” recession, and growth in emerging economies moderated. occasional bouts of volatility in financial markets complicated the lingering global uncertainty. with monetary policy loose and fiscal space limited, particularly in the advanced economies, capital flows worldwide have been relatively more volatile as investors responded to uncertainty in major advanced economies. this impacted adversely on some emerging economies with rising inflation, capital outflows, and sudden depreciation of their currencies. policymakers around the world introduced several non - conventional measures to calm financial markets and provide confidence to investors. the mauritian economy grew at a relatively healthy rate of 3. 4 per cent in 2012 despite the negative sentiment that prevailed during much of that year. headline inflation came down from 4. 9 per cent in july 2012 to 3. 6 per cent in june 2013 while year - on - year inflation stabilized, decreasing marginally from 3. 7 per cent to 3. 6 per cent. the increasingly diversified nature of our economy in terms of markets and products, and prudent and appropriate fiscal and monetary policies implemented during the year, maintained macroeconomic and financial stability in the country. we benefited from a steady flow of foreign direct investment, not far from previous highs, during the period. unemployment hovered around 8. 1 per cent in 2012, a level that i do not consider alarming in the current context, especially if account is taken of chronic over - reporting, continued skills mismatch, and labour market inflexibility which induces employers to have recourse to foreign labour. during the year, the bank was called upon to respond rapidly to the changing dynamics at the international level as well as on the domestic front. operation reserves reconstitution in june 2012, the bank launched the operation reserves reconstitution ( orr ) – an unconventional measure for the bank of mauritius which had

the capital adequacy ratio of banks remained well above the regulatory requirement of 10 per cent. nonetheless, the growing non - performing loans and the concentration of risks in our banking sector continued to raise financial stability concerns. bis central bankers ’ speeches we started work during the year on the introduction of a wide range of macroprudential measures to contain banking sector risks. at the heart of a modern economy is a robust and efficient payments system. the cheque truncation system, introduced the year before, saw the end of physical exchange of cheques on the bank ’ s premises on 31 january 2013. international regional role we continued to participate actively in regional fora organized by sadc, comesa and aacb and brought our contribution to discussions relating to regional issues. the comesa repss went live in october 2012. we were privileged to host in november 2012 the second meeting in africa of omfif, which regroups diverse players from the public and private sector, central banks of developed and developing economies, sovereign wealth funds, and academia. nearly 100 delegates from europe, africa, asia and latin america participated in the meeting. on 30 august 2012, at the conclusion of the 36th assembly of governors of the aacb in algeria, i assumed the vice - chair of the aacb, with governor mohammed laksaci of the bank of algeria in the chair. in august 2013, the bank hosted the 37th assembly of governors of the aacb – the first time in its 45 - year history that the aacb has held its meeting away from continental africa – and i took over the chair for a one - year term. almost simultaneously, i was appointed by the fsb rcg for sub - saharan africa as its non - fsb member co - chair for a two - year term starting 1 july 2013. over and above the governors who participated in omfif and aacb meetings in mauritius during the year, i welcomed ms christine lagarde, managing director of the imf, dr duvvuri subbarao, governor of the reserve bank of india, and mr martin redrado, former governor of the central bank of argentina. monetary policy committee since its inception in april 2007, the monetary policy committee ( mpc ) witnessed several changes. 30 meetings have been held of which 29 were interest - rate - setting meetings. the mpc was reconstituted, for the second time, in december 2012 and the total number of members was reduced from nine