“We need to find alternative institutional arrangements for the MIC!”

Dr. Rama Krishna Sithanen, the recently appointed Governor of the Bank of Mauritius (BoM), addressed the public in his first press conference, shifting focus from monetary policy and rupee stability to the Mauritius Investment Corporation (MIC). The MIC, established during the COVID-19 pandemic to support struggling sectors, has been at the center of public debate due to allegations of misuse, structural challenges, and its impact on the economy. Dr. Sithanen’s speech sought to clarify misconceptions, highlight the complexities of MIC’s operations, and propose a strategic path forward. Emphasizing the importance of confidentiality, the Governor condemned recent leaks that could harm trust in Mauritius as a financial jurisdiction. He provided an in-depth breakdown of MIC’s financing model and its beneficiaries, addressing public concerns while reaffirming the Central Bank’s commitment to transparency and fiscal stability. His call for reform signals a critical juncture in realigning the MIC with national economic priorities.  

In his first press conference as Governor of the Bank of Mauritius (BoM), Dr. Rama Krishna Sithanen addressed a range of pressing issues surrounding the Mauritius Investment Corporation (MIC). While initially planning to focus on monetary policy and the rupee’s stability, Dr. Sithanen shifted the discussion to the MIC in response to mounting public concerns and media speculation.

“It has never been in my plan to hold my first press conference on the Mauritius Investment Corporation (MIC),” he said. “It was supposed to be on monetary policy and the stability of the rupee, but I have a duty to calm things down a bit because many of these enterprises are listed.”

The Governor expressed alarm over recent leaks of sensitive information related to two commercial banks. “Two weeks ago, when I was appointed, I noticed leakages of confidential banking information of two commercial banks in the public domain. It is not good. There are other ways of expressing one’s disagreement, or else people won’t trust our jurisdiction.”

Calling for stakeholders to follow proper legal avenues for addressing concerns, he emphasized that breaches of confidentiality could harm Mauritius’ reputation as a financial hub. “The bedrock of our banking system lies in confidentiality. No one will like their confidential banking information to be circulating,” he stated. 

Dr. Sithanen provided an overview of MIC’s structure and purpose, highlighting its establishment during the COVID-19 pandemic to support key sectors of the economy. He acknowledged public confusion about its activities, and outlined the categories of enterprises that have benefited:  

1. Fully secured companies honouring their commitments:

   “These companies have pledged assets as security, and are meeting their obligations. However, we have some issues regarding pricing at the start, which created competition disparities.”

2. Partially secured companies:

   “We are working with these companies to ensure their assets become fully secured, as opposed to partially secured.”

3. Companies in arrears:

   “It happens that some companies contract loans and later face difficulties. In these cases, MIC has issued letters requesting explanations and asking them to settle the arrears.”

4. Alleged abuse cases:

   “There are those who made an abuse of the system and tried to defraud public funds. We must act decisively in these instances.”  

Dr. Sithanen urged the media to make distinctions between these categories to avoid spreading misinformation. “We must not create confusion and amalgamations, which can lead to unintended consequences that are not good for our economy or our country,” he explained.

Financing the MIC  

Dr. Sithanen also addressed misconceptions about MIC’s funding, stating that “many economist friends continue to say that $2 billion of reserves were converted into rupees, giving us the famous MUR 80 billion. This is not true at all.”  

He clarified: “In my opinion, it was impossible for them to convert the reserve. What they did instead was essentially to print money – a mere ‘jeu d’écritures.’ This has impacted the depreciation of the rupee, consumption, and inflation.”

He then provided a detailed breakdown of MIC’s investments:

• 31%: Allocated to Airports Holdings Limited (AHL), with a portion directed to Air Mauritius.  
• 21%: Secured redeemable debentures, primarily in the tourism sector.  
• 10%: Land investments.  
• 3%: Equity investments.  

The Governor emphasized the challenges associated with these allocations. “Government sold 49% of AHL to the Central Bank. AHL reimbursed its debts, which amounted to MUR 13 billion, and then loaned Rs 12 billion to Air Mauritius. We can have a solution with AHL with regards to MIC, but it will be very difficult for them to find MUR 25 billion to address this issue.”

The Governor expressed his belief that the MIC’s current structure does not align with the BoM’s primary mandate: “I do not believe that it is the mandate of a central bank to invest in land, equity, or debentures. Our primary functions are price stability, financial stability, and the stability of the rupee.”

Calling for a strategic shift, he stated that “we need to find alternative institutional arrangements for the MIC! However, this has to be done with discipline and strategic thinking.”

Dr. Sithanen further highlighted the importance of aligning MIC’s activities with national priorities, such as food security and renewable energy. “The government needs lands for two main reasons: food security and renewable energy. It will not make sense for me to sell these lands only to make profits, but we need a solution,” he affirmed.

The government needs lands for two main reasons: food security and renewable energy. It will not make sense for me to sell these lands only to make profits

He assured the public of greater transparency moving forward. “The Annual Report of the MIC is public and will be uploaded on its website. The information will also be available in the Financial Statement of 2024, in the name of transparency,” he explained.

He concluded by emphasizing the need for collaborative discussions with stakeholders: “I have my idea of what to do, but I must discuss it with others. It is a question of coming back to basics and focusing on the core mandate of the Bank of Mauritius.”