The Bank of Mauritius said plans to launch a central bank digital currency are making strides and it will begin a pilot project in the next couple of months.

“Work is already at an advanced stage,” governor Harvesh Seegolam said in Port Louis on Wednesday. “We have now entered the experimentation phase.”

The Indian Ocean island nation originally announced its ambitions to pursue a digital rupee in 2019 and has since taken steps to embrace financial technology including amending the law to allow the central bank to grant digital banking licences.

Seegolam, in his prepared remarks, said that there’s “significant interest” in setting up digital banks in Mauritius and there are already a few applications in the pipeline.

He also noted that while the bank had an “open mind” on new technologies, the rapid changes being witnessed in fintech carried risks as well as benefits.

“It is nevertheless imperative for us to have a full grasp of the potential implications on economic activity, financial stability, reputation and even inflation,” he said.

The island also plans to promote itself as a hub for multinationals to set up their treasury headquarters in the region on the basis of its modern financial services sector, he said.

The bulk of the governor’s remarks were focused on the development of financial markets and digital transformation. But he did take time to note that the central bank has significantly scaled back its intervention in foreign exchange markets to US$164-million since the beginning of the year, compared with $622-million in the same period of 2022.

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“However, as this period of the year is tantamount to the building of end-of-year stocks, the Bank of Mauritius stands ready to provide support to the FX market in case of need,” he said. — Kamlesh Bhuckory, (c) 2023 Bloomberg LP