Government is, as from today, issuing two Government of Mauritius Savings Bonds reserved for individuals namely, - a five-year Government of Mauritius Savings Bonds at a fixed coupon rate of 6% per annum and a five-year Government of Mauritius Inflation Index-linked Savings Bonds at a fixed interest rate of 2% per annum plus the annual headline inflation rate.
This measure which follows the proposal of the Prime Minister, Minister of Finance and Economic Development, Dr Navinchandra Ramgoolam, is in line with the new focus on ensuring stability in the financial market and improving the monetary policy transmission mechanisms. At the same time, these issues will protect savers from the adverse impact of the current excess liquidity situation on their interest income.
The issue of these bonds is also deemed crucial at the macroeconomic level for the implementation of the Transformation Agenda outlined by Dr Ramgoolam with the triple overriding and interrelated objectives of attaining high income, inclusiveness and sustainability.
The key features underlying the two bond issues are as follows: an initial amount of Rs 2 billion which can be increased depending on the interest of individual investors and the excess liquidity situation; maximum investment ceiling of Rs 500 000 per individual to allow for a larger number of small savers to buy the bonds; interest rate at 6% per annum for the Bonds at fixed coupon and a fixed interest rate for the Inflation Index-Linked Bonds plus a full adjustment for the inflation rate.
Other conditions pertain to mainly: interest payment on a half yearly basis on the 31st January and 31st July; early redemption of the bonds only after two and a half years subject to a penalty fee on the interest amount; sale of bonds to be effected through commercial banks, the Mauritius Post Ltd and various post offices with a view to ensuring that sale is done in a maximum number of outlets and covers a larger number of individuals; and transferability of Bonds from one individual to another eligible individual that is those not already holding the maximum Rs 500,000 allowable of these Bonds.
The main objectives of this issue are to: promote the national savings culture; offer households, especially those who depend on interest income, a higher rate of interest on their lifelong savings; protect their interest income from inflation and earn a positive real return; and help mop up excess liquidity in the banking system which is causing interest rates on savings to fall to low levels.
This new issue of Government Bonds also reflects a more effective coordination between the Ministry of Finance and Economic Development and the Bank of Mauritius concerning monetary policy, with focus on addressing the problem of excess liquidity and improving the effectiveness of decisions taken on the Key Repo Rate.
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