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Mr. James Y. Yao, Mr. Gamal Z El-Masry, Padamja Khandelwal, and Mr. Emilio Sacerdoti

Abstract

Mauritius has one of the more sophisticated financial systems in Africa, a system that is soundly capitalized and profitable. Assets of the banking system represent about 100 percent of GDP. While the financial sector was already relatively well developed at independence, the robust economic performance over the last two decades strongly contributed to its further expansion. At the same time, the solidity and sophistication of the financial system also played a key role in supporting the diversification of the economy. It can be argued therefore that a virtuous cycle was established from early on, in which the financial system and the productive sector strengthened in parallel, with each sector providing support to the other and contributing to its modernization and deepening. A sound regulatory framework and monetary policies geared to macroeconomic stability provided a key contribution to the soundness of the financial system.