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PUBLIC

TULIIT

PECORD OFFICE

Reference -

MMMC.O.882/12

PUBLIC RECORD OFFICE, LONDON

ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC-

COPYRIGHT PHOTOGRAPH-NOT TO

136

about four-fifths of the foreign exchange available from the sale of the sugar crop is in the hands of a single body, the Mauritius Sugar Syndicate, through whom the great bulk of the

is sold. crop For practical purposes the Syndicate and the Bank may be regarded as a single authority. The Bank or Syndicate, in the interests of planters and Bailleurs de Fonds, naturally desired to obtain the highest possible rates for sterling, with the result that the general public were obliged to pay higher prices for everything they buy, as the imports could only be paid for by purchasing sterling from the Mauritius Bank or from those to whom they allotted it on their own terms. It may be noted that this position is inde. pendent of the fact that Mauritius uses rupee currency and might equally arise if sterling currency were adopted, so long as the great bulk of the available sterling exchange is controlled by one authority; although it is no doubt the case that the adoption of the Indian rupee introduces complicating factors. To counteract this it has been agreed that the Currency Commissioners should undertake to sell drafts at reasonable rates against notes paid into their vaults and to buy drafts offered. As a result the value of notes in circulation has diminished from Rs.14,553,250 in September, 1930, just after the system was inaugurated to about Rs.6,750,000 at present. If this result merely indicated that sur- plus currency in circulation had been withdrawn there would be no cause for anxiety as any shortage could, at any time, be made good by the sale of drafts to the Currency Commissioners or alter- natively by the importation of silver rupees, and while the balance of trade provides an adequate supply of foreign exchange the Banks would be compelled to adopt this method.. At the present time, however, it is urged that since the balance of trade in the last two years has been against the Colony to the extent of at least Rs.22,000,000 (see paragraph 3) there are no longer any sterling resources available from which they can replenish their local cash reserves or pay for silver imports.

9. In these circumstances it may be asked how money is found to purchase drafts from the Currency Commissioners to pay for imports. I am given to understand that importers, especially from India, can raise credits in India against goods shipped to Mauritius and on the sale of these goods here to retail dealers remit the money to pay for them without drawing notes from the Banks and paying them into the Currency Commissioners vaults where they remain immobilized. It is alleged also and I have no doubt with some truth, that the larger Indian merchants draw on the Com- missioners for sums in excess of their own requirements and retail these credits to their smaller brethren at a much enhanced rate, so that in these cases the consumer derives no benefit from the low rates of exchange provided by the Currency Commissioners. These processes allow over trading," and result in increasing im- ports beyond what is strictly necessary, whereas it is urged with

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some reason that in view of the heavy adverse balance of trade, imports should be restricted to essentials. As against this there is the fact that in the case of rice at any rate, which represented over 22 per cent. in value of the imports in 1930, there is a definite tendency to put up prices whenever local stocks fall, and it is therefore essential to ensure that adequate supplies can always be obtained. This, however, can be assured so long as the Currency Commissioners retain the right to finance importations whether of rice or other necessities whenever the occasion seems to them to demand it. This right of control is what differentiates the pre- sent position from that which existed when there was an embargo on the export of silver and no provision for the sale of drafts by the Currency Commissioners. The power of control which the Commissioners thus exercise should in all circumstances be retained.

10. Whatever may be the theoretical position the fact remains that the cash resources of the Bank of Mauritius have been brought very low. As reported in my telegram No. 172 of the 13th [?14th] December their "caisse at the beginning of December was reduced to about Rs.1,192,000. This Bank being dependent on its own resources maintains a cash reserve of about one-third of its current accounts and deposits as a general rule, but judging from the balance sheet published in October where the total of these accounts is shown at just over Rs.7,005,000 (about Rs.1,085,000 less than in the equivalent statement for 1930) the proportion of cash had sunk when this information was given to me to about 17 per cent.-a dangerously low figure if the Bank were unable to augment it. The Chairman showed me figures of their commitments in sterling exchange up to February from which it appeared that including their authorized overdraft in London and their expected receipts from the sugar crop, the position would just balance leaving no margin at all for new business or the replenishment of cash. I was unable to take a copy of these figures which are naturally highly confidential but I have no reason to question their accuracy. copy of the balance sheett published in October is attached. The position has been aggravated in the case of this Bank by the fact that owing to the restriction of credit in London their authorized overdraft has been reduced from £150,000 to £75,000, full account of this overdraft has been taken in the above statement. shortage of funds has been noticeable in the case of all the banks and has reached such a point that I am informed that the with- drawal of even quite moderate sums, such as Rs.10.000 is followed by inquiries between the Banks as to its disposal and destination. There is also considerable anxiety amongst the mercantile firms as to their prospects of payment of outstanding accounts which I am told amount probably to over Rs.5,000,000 of which about

* C. 80091/31 [No. 26]: not printed.

Not reprinted here..

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PUBLIC

RECORD

OFFICE

Reference -

C.O.882/12

PUBLIC RECORD OFFICE, LONDON

ALLY WITHOUT PERMISSION OF THE BF REPRODUCED PHOTOGRAPHIC-

COPYRIGHT PHOTOGRAPH-NOT TO

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