* Governor wants to raise rates, less govt borrowing
* Finance minister disagrees
* Mauritius trying to reduce reliance on tourism
By Jean Paul Arouff
PORT LOUIS, Feb 18 Mauritius' top finance
officials on Tuesday sought to end a monetary policy rift that
could damage the Indian Ocean island's economy as it tries to
broaden its base to offshore banking from tourism alone.
Finance Minister Xavier Duval and Central Bank Governor
Rundheersing Bheenick disagree over whether to raise interest
rates and over government borrowing. They met for the first time
on Tuesday since their clash became public.
Officials said the meetings will be held monthly.
The debate is not unlike that being held in other emerging
market economies where there is a desire to protect against
investment flight while not damaging economic growth.
Mauritius's monetary policy committee held the main interest
rate, the repo rate, at 4.65 percent earlier this
month. However, its members were divided on the decision.
Bheenick has said hiking the rate would protect Mauritius
from turbulence that has hit other emerging markets and would
address the low level of savings in a nation that promotes
itself as an offshore banking centre.
He has also blamed the government's foreign borrowing for
pumping too much money into the banking system.
But the finance ministry blames the excess liquidity on
sluggish demand for private sector credit, frequent purchases of
foreign currencies by the central bank to build up its hard
currency reserves and constant signalling by the central bank
that it wants a tighter monetary policy stance.
Minutes of the MPC meeting released by the central bank
showed that the central bank governor and his two deputy
governors were in the minority when they voted for a rate hike
of 50 basis points. There are a total of 8 members of the MPC.
The finance ministry said Tuesday's meeting and the ones to
follow "will allow both parties to review the economic
situation and discuss about current priorities and future
Analysts said they welcomed the fact that the two sides
would be meeting to discuss how to run the economy.
"The financial crisis has demonstrated that policy makers
need to collaborate because at the end of the day monetary and
fiscal policies should be mutually reinforcing," Raj Makoond,
director of the Joint Economic Council, a private sector
umbrella group told Reuters.
"To have a shared understanding of the problem, it is
fundamental that both parties share notes in the interest of the
In a bid to broaden its economy, which grew an estimated 3.2
percent in 2013, Mauritius has been trying to reduce its
reliance on tourism, sugar and textiles and now has growing
businesses in offshore banking, outsourcing, luxury real estate
and medical tourism.
The central bank has said that it expected the economy to
expand by 3.7 to 4.0 percent in 2014.