IMF asks Mauritius to monitor offshore investments

The International Monetary Fund (IMF) has asked Mauritius to set up a ‘macro-prudential authority’ to monitor the offshore investments from the island. One of the largest destinations of such offshore investments is the Indian stock market. The proposed authority will have a central role for the banking regulator, the Bank of Mauritius, to improve the assessment and mitigate systemic risks, the IMF said in a release. According to the IMF, the nation faces spill-over risks from the inter-linkages between large offshore activities, the banking system, and the domestic economy. The Fund has also recommended cutting back the ‘zero tax’ treatment since it makes the island’s banks take more risks than they can handle. The IMF made these comments following Article IV consultation with Mauritius. The IMF holds bilateral discussions with members, usually every year. An IMF team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. Following this, a report is prepared and submitted to the IMF Executive Board for discussion. A summary of the discussion is then shared with the country concerned. During the consultation with Mauritius, the Fund also noted the need for the country to have a strong Forex reserve base. As of February, the nation’s reserves stood at $4.3 billion. The proposed authority, according to IMF, will force foreign companies to offer more information about the source of their funds. This will address “information gaps regarding offshore business companies and their role in conglomerate groups”, the Fund said.