Depreciation of the Mauritian Rupee and the shortage of Foreign Exchange is a matter of parliamentary debate. The former and the current treasurer have argued about the fall of Foreign Currencies, estimated to be deliberate, and about the purchasing power of the average Mauritian. Xavier Luc Duval elaborated on his questions and analysis at his customary press conference following his PNQ.
General situation
The shortage of Foreign Exchange on the local market and the depreciation of the Rupee were the focus of the questions to the finance minister. The questions around the general situation in the country can be summed up as follows: Is the Bank of Mauritius deliberately depreciating the Rupee to increase the tax revenue on imports, VAT and customs duty, thus creating this high cost of living? The fact is that the US dollar cost Rs 35 in 2020 and Rs 43.15 in 2022, while more than three quarters of the products consumed in Mauritius come from imports or else raw materials. The observation on depreciation since 2015 is to the tune of Rs 40%. On the other hand, importers attest that there is a shortage of Foreign Currencies and this is causing a drop in their imports by 25%
Attack and counter-attack
Xavier Luc Duval’s attack was frontal: “Will he state the measures, if any, that Government and the Bank of Mauritius, propose to take to reverse the ongoing fall in the exchange rate of the Rupee vis à vis the US dollar and the ensuing scarcity of this currency in commercial banks in Mauritius?”
Renganaden Padayachy, the Minister of Finance, Economic Planning and Development in his argument substantiated the situation since 2012 when the world economy was not facing a global Covid-19 pandemic and nor war. “There was no containment or border closure. Tourism was not at a low ebb and so, foreign exchange levels and exports were not affected. Between 2005 and 2014, the rupee was devalued by 11.2% by a Government that cared little about the purchasing power of Mauritians, especially the most vulnerable.”
As a counter-attack to XLD, he also reminded the Parliament that the Opposition Leader, Xavier Luc Duval, in 2012, injected $100 million specifically to devalue the Mauritian rupee. “In 2012 when the world market was doing well, the level of exports and goods and services stood at Rs 188.6 billion, the Rupee had gone from Rs 29.9 in 2011 to Rs 31.2 for the US dollar in 2012, for the pound sterling from Rs 46.7 to 50.3 and the Euro from Rs 39.4 to Rs 40.9. The devaluation was Rs 11.2. In the two years of the Mauritius pandemic, the economy recorded a deficit of some Rs 122 billion in foreign exchange inflows on exports of goods and services alone,” he said.
Thus, he elaborated on the fact that Mauritius has lost about 2.3 million tourist entries in 2021, that is 1.3 million tourists for the year in 2019 to 300,000 in 2020 and 180,000 in 2021. He recalled that during the pre-Covid period, a tourist would spend 1200 euros on average. From his export figures, “in 2019, the revenue was Rs 191.9 billion and went down to Rs 128.9 billion in 2020 and Rs 132.9 billion in 2021. The decline in gross value added in 2019 was Rs 51.8 billion and Rs 49.3 billion in 2020“.
Depreciation and alleged shortages
Returning to the issue, Xavier-Luc Duval wanted to know what measures the government and the Bank of Mauritius (BoM) were taking to combat the depreciation of the Mauritian Rupee against the US dollar and to counter the shortage of Foreign Currencies in commercial banks.
Renganaden Padayachy retorted that “If there was really a Foreign Exchange shortage, do you think there would have been all these products in the supermarkets? This shows that there is no shortage of currency,” he said. He also tackled “apart from some who are trying to play a speculative game on the value of the Rupee and are holding Foreign Exchange in their accounts, and that’s why you have banks refusing to sell them Foreign Exchange, but in general, the Central Bank is supplying Foreign Exchange.” He also disclosed that he does not wish to interfere in the affairs of the BoM but that “since the beginning of the pandemic, the Bank of Mauritius has sold some US$2.9 billion in the market, the BoM has also intervened in the market to the tune of $25 million at an appreciated rate of Rs 43.15 against Rs 43.25.”
But Xavier Luc Duval, during his press conference, insisted that “There is indeed a shortage of foreign exchange in Mauritius as a result of the depreciation of the Rupee.” He said that a “recapitalisation of the Central Bank is essential to reverse the trend” and reiterated that since Renganaden Padayachy took over the Finance portfolio in November 2019, the Mauritian rupee has depreciated by 8% in 5 months.
Padayachy: “We will not follow the IMF recommendations”
The International Monetary Fund (IMF) 2020/21 report states that the Mauritian Rupee is overvalued by 40%. The Opposition Leader asked “Does the Minister agree with this assessment of the IMF?” Renganaden Padayachy made it clear that “Of course, we have to consider the IMF rating. As a democratic state, we receive these ratings and recommendations, but we take our decisions independently… The rupee has been devalued, but we are not going to follow the IMF recommendations,” he added. He backed up his statement by explaining that following the pandemic, the BoM is maintaining the appreciation of the Rupee based on the resurgence of Tourism hoping for Foreign Exchange inflows.
In a sarcastic comment, Xavier Luc Duval suggested that “hope keeps the BoM alive, but does not feed the people”.
The debate is not yet closed!
