The Bank of Mauritius has intervened 19 times on the domestic foreign exchange market and an overall amount of $ 575 million of the Bank’s reserves has been sold on the local market since the beginning of 2021. The first intervention of the central bank of this kind on the domestic foreign exchange market in 2021 happened on January 11 with $25 million sold at a rate of Rs. 39.25 and this has ever since then been repeated overtime. The sum of $75 million was sold by the Bank on the domestic market at a rate of Rs. 40.30 on April 29.
According to financial analysts on the stock exchange, this exercise is commonplace given the exceptional economic circumstances. This has been done to address the shortage of foreign exchange on the domestic market. Since the closure of borders in March 2020, the amount of foreign exchange on the market has plummeted. 35% of Foreign Exchange on the domestic market used to come from Tourism. Domestic market deficit of foreign exchange is estimated at $145 million according to experts which explains the intervention of the Bank of Mauritius to bridge the gap until the full re-opening in October.
What has shocked the banking and finance business community in the intervention of June 28 is the rate at which the BoM agreed to buy the US dollar. The Rs. 42.50 rate at which the BoM agreed to sell the US dollar weakened the Mauritian Rupee by an additional 4% which means that the value of the Rupee is now at an all-time low since December 2010. A decision likely to have a severe impact on purchasing power and trade.
