Why is the Rupee Depreciating Uncontrollably?
And what will it take to stop the decline?
By Vinaye Ancharaz
On July 8, the Bank of Mauritius intervened on the foreign exchange market, selling a total amount of USD 50 million. This was the third intervention by the Bank this year, following a sale of USD 5 million on April 1 and, oddly enough, a purchase of USD 200,000 on February 2. Sales of foreign currency are meant to plug shortages of the currency on the market and relieve pressure on the currency to appreciate, or the rupee to depreciate. Despite recent foreign exchange interventions by the Bank, the rupee’s slide has continued.
Between November 8, 2019, when this government took office, and July 9, 2024, the rupee has depreciated by 30% against the US dollar, 28% against the euro, and 30.5% against the pound. Since December 11, 2014, when the MSM government first came to power, the rupee has lost 50% of its external value against the dollar, the steepest decline among all major currencies. This reflects the weight of the dollar in our foreign exchange dealings, which is also the reason for the Bank’s interventions to be mainly in USD. Mauritius pays for much of its imports in terms of USD, but its exports of goods and services are EU-centric, hence the perpetual shortage of US dollars relative to other currencies. Read More… Become a Subscriber
Mauritius Times ePaper Friday 12 July 2024
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