Inflation is likely to rise further in Mauritius, central bank governor Rundheersing Bheenick said on Saturday, reinforcing speculation that the central bank may raise rates at its March meeting.

The year-on-year inflation rate rose to 6.1 percent in Dec 2010 and central bank projections now show it at 6.5 percent in June, Bheenick told Reuters in an interview on the sidelines of an Africa conference.

He had warned in December that Mauritius might have to raise interest rates if inflation keeps rising, three months after the bank slashed rates by 100 basis points, to 4.75 percent.

The forecasts are not that good, because inflationary pressures are building up everywhere, Bheenick said.

What we should guard against are second round effects.

Food prices have since hit record highs, oil prices have risen above $100 a barrel, and Mauritian inflation rates have continued to rise.

Asked if the central bank was likely to raise rates at its next meeting in March, Bheenick said:

The governor is only one voice. We will have to see what the balance of opinion is. Many countries have started revising up their policies.

Former Bank of England policymaker Alan Budd will conduct a review of the central bank's internal policies and Bheenick said he would like to see the central bank publishing minutes of its meetings and voting patterns among the eight-strong Monetary Policy Committee.

We want to make people more responsible for what they do.

ISLAMIC DEBT

Mauritius, like many African countries, has strong infrastructure needs. But relatively restrained debt levels of around 60 percent of GDP mean the country could consider issuing international bonds.

There is a possibility for us to move in that direction, assuming funding becomes a problem, Bheenick said, adding several banks approached Mauritius about launching international debt prior to the global financial crisis.

Ghana and Gabon launched bonds in 2007 and Nigeria recently issued a debut Eurobond totalling $500 million.

The central bank may start to issue sharia-compliant Treasury bills this year, and the first Islamic bank in Mauritius will open in March, Bheenick said.

Mauritius' central bank has increased its levels of foreign exchange reserves, built up as it intervened from the middle of last year to prevent the rupee from appreciating.

The rupee has risen 10 percent since May 2010 despite the intervention, as Mauritius has enjoyed an increase in foreign direct investment in sectors such as tourism.

FDI totalled 11 billion Mauritian rupees last year, back to pre-crisis levels.

It will probably be more this year, Bheenick said.

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