Discuss how each of the above transactions will affect the Balance of Payments and show under which heading the transactions will be recorded: Mauritius has a free floating exchange rate regime: (i) Oxenham Ltd imports a year's supply of French champagne. Payment in euros is due immediately. (ii) Omnicane(a local company) has successfully privately placed a bond issue of USD100m to foreign institutional investors. The first coupon is due in six months’ time and the rate of interest is 2 % per annum. The proceeds have been used to repay a commercial bank for a USD bank loan which came to maturity. (iii) Air Mauritius (MK) buys a Boeing 747 for USD 160 million. As part of the deal, Boeing arranges a loan to MK for the purchase amount from the U.S. Export-Import Bank. The loan is to be paid back over the next ten years with a two-year grace period.
Discuss how each of the above transactions will affect the Balance of Payments and show under which heading the transactions will be recorded:
Mauritius has a free floating exchange rate regime:
(i) Oxenham Ltd imports a year's supply of French champagne. Payment in euros is due immediately.
(ii) Omnicane(a local company) has successfully privately placed a bond issue of USD100m to foreign institutional investors. The first coupon is due in six months’ time and the rate of interest is 2 % per annum.
The proceeds have been used to repay a commercial bank for a USD bank loan which came to maturity.
(iii) Air Mauritius (MK) buys a Boeing 747 for USD 160 million. As part of the
deal, Boeing arranges a loan to MK for the purchase amount from the U.S.
Export-Import Bank. The loan is to be paid back over the next ten years with a two-year grace period.
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