Debates, Overnight Rate: Is Decline Truly Solution

9 years ago - September 30, 2013
The monetary policy committee will meet again today. If exporters are in favor of maintaining the rate in the worst case and a lower rate in the best case, many observers argue that such a decision will not change the situation. Here are their views.

Ahmed Parkar (director of Star Knitwear): "The status quo or decrease"

Ahmed Parkar is categorical. "There is no risk of inflation. The dangers that had been raised have not materialized, "suggests the director of Star Knitwear. That is why he is in favor of maintaining the repo rate or a decrease of about 25 or 50 basis points.

"The United States and Europe have sent a clear signal now the rate for one or two years to boost employment and investment. We must do the same in Mauritius especially as our balance of payments is not favorable. It is therefore important to support our exports, "says Ahmed Parkar. Especially a high-interest "affects the rupee" and "increases the cost of corporate money."

Jankee Chandan (Associate Professor of Economics at the UoM): "A balance of power between the BoM and Finance"

A change of manager to approach the budget rate is not recommended. This is the opinion of Chandan Jankee. "The downward revision in the repo rate is far from being the solution to business problems. Instead, a decrease only fueled a sterile debate and created more uncertainty. Instead of being an economic tool that can bring some development in the country, the repo rate has become a relative strengths of the Bank of Mauritius and the Ministry of Finance ", says Associate Professor of Economics at the University of Maurice.

It is more important, he recommends, to expand the scope of action of the Monetary Policy Committee, allowing him to have a say in the savings rate and the rate of the loan, the bank charges or access to finance certain sectors. "It should also allow the committee to ensure the quality of investment and funding that a bank," he says.

Eric Ng (Director, Office PluriConseil): "It will not deleverage companies"

Eric Ng does not go with the back of the spoon. "A lower interest rate is not an economic solution or a structural solution. It is not lower repo rate will depreciate against the euro and the rupee will not help either the structural problems in the labor market and the lack of productivity in the public service, "says the director of Cabinet PluriConseil.

Since 2008, he argues, the Repo rate decreased in the order of almost 350 basis points. "But we did not see recovery in investment. On the other hand, the downside is that lower penalizes savers and encourage consumption. This has an impact on the current account deficit which is already at an alarming level, or almost 11% of GDP, "says our interlocutor.

While pursuing Eric Ng, a decline "ease the financial burden on companies," but it "will not solve their debt problem." "There is only one way for companies to deleverage. They must repay their capital. To do this, they must sell the assets of the company, to use a fundraiser on the stock market or promote the injection of capital by the shareholders, "he recommends. Eric Ng expects a standstill on Monday. "But you never know. It seems that the Ministry of Finance has an influence on the monetary policy committee. We saw last time, "he says.

Ritesh Rajkumarsing (Managing Partner at Russellwitt): "A drop ease leveraged firms”

"Given the current economic climate, lower the repo rate is desirable because the borrowing rate is high compared to the rate of savings," says Ritesh Rajkumarsing 'Managing Partner' of the firm accountant Russellwitt. A reduction in the interest rate, he says, will "help" and "relieve" the indebted companies especially as the "financial situation is not very rosy."

Swadicq Nuthay (AXYS Capital economist): "A drop will not bring much"

Swadicq Nuthay, economist at AXYS Capital, is in favor of the status quo. "A drop will not really make much. I'm not convinced that it will boost growth. Maintaining the policy rate is better, "says our interlocutor.


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