Bank of Mauritius Injects $125 Million Into Forex Market in 2024

The Bank of Mauritius (BoM), the country's central bank, injected a total of 125 million US dollars into the local foreign exchange market between January and 22 October 2024. The disclosure highlights the scale of official intervention needed to maintain stability in the Mauritian rupee against major international currencies.

The foreign exchange market, known in French as the marche des changes, is where banks, businesses and other financial institutions buy and sell currencies. When the rupee comes under pressure, typically because demand for foreign currency outstrips supply, the central bank can step in by selling US dollars from its reserves to steady the exchange rate.

Mauritius is a small, open economy that depends heavily on imports for food, fuel and manufactured goods. Most of those transactions are priced in US dollars or euros, which means the value of the rupee has a direct impact on the cost of living and the cost of doing business on the island.

The BoM's interventions throughout 2024 reflect ongoing pressure on the rupee, a pattern that has continued since the economic disruptions of the COVID-19 pandemic period. Tourism receipts and foreign direct investment are the main sources of foreign currency inflows for Mauritius, and any shortfall can push the rupee lower, raising import costs and feeding inflation.

By selling dollars into the market, the BoM effectively increases the supply of foreign currency available to local banks and businesses, which helps prevent a sharp depreciation of the rupee. However, such interventions draw down the country's foreign exchange reserves, so they cannot continue indefinitely without consequence.

Mauritius held gross international reserves of around 7 billion US dollars as of mid-2024, according to earlier BoM data, giving the central bank room to act. Even so, sustained intervention raises questions about the longer-term outlook for the rupee and the underlying trade and current account deficits that create the need for such support.

What this means: If you live in Mauritius, receive a salary in rupees, or pay for imported goods, central bank forex intervention directly affects your purchasing power. A weaker rupee means higher prices for fuel, food and electronics. The BoM's 125 million dollar injection is an attempt to slow that depreciation, but it also signals that external pressure on the currency has been significant throughout 2024. Investors, importers and households should monitor exchange rate trends closely as the year closes.

Source: Le Defi Media