Currency Shortages: Proposed Solutions at Elections Eve

In recent months, Mauritius has been grappling with a shortage of foreign currencies, specifically US dollars and euros. As the electoral campaign gains momentum, the state of the currency market has become a focal point in political discussions. The ruling Alliance Lepep claimed to have implemented measures aimed at stabilizing the situation; however, the opposition party, the Alliance du Changement, argued that these actions are insufficient to remedy the struggling market.

Current Situation

According to economic observer Tahir Wahab, the challenges facing Mauritius’ foreign exchange market are influenced by a combination of factors, including the global economic climate, tourism revenues, and a seasonal increase in demand as the year comes to a close.

“The current fluctuations reflect a complex situation where the Mauritian economy increasingly relies on foreign currencies to maintain the stability of commercial exchanges,” Wahab explained.

He noted that the reported shortages of these currencies have hampered merchants’ abilities to import products, resulting in sometimes lengthy wait times to access necessary funds.

Alexandre Sanchini, CEO of Blue Ship Capital, echoed these concerns.

He pointed out that the currency shortage primarily affects private sector participants, both businesses and individuals.

Despite recent interventions by the Bank of Mauritius, access to foreign currencies remains challenging.

Sanchini emphasized that this lack of liquidity is exerting increasing pressure on the market, contributing to the depreciation of the Mauritian rupee, which in turn affected the cost of living and inflation rates.

Financial expert Hafeez Toofail added that although the Bank of Mauritius made attempts to stabilize the situation through two interventions in October 2024, these efforts have not sufficiently met the demand.

“The market is under pressure due to seasonal demand; businesses are stockpiling for the upcoming holiday season, and individuals are traveling more,” he observed.

This heightened demand exacerbated the imbalance between currency supply and demand, driving prices upward.

Political Implications

With purchasing power becoming a significant concern for voters, economic stakeholders lament the lack of a broader discussion regarding monetary stability in political narratives.

“While some political leaders mentioned monetary stabilization, the proposed solutions often lack depth,” Wahab stated.

He emphasized that meaningful monetary policies and necessary reforms require strong political will to effectively impact the currency market in the long term.

Sanchini agreed, noting that while the depreciation of the rupee is commonly cited as a contributing factor to imported inflation, the ongoing currency shortage—affecting mainly businesses—remained relatively overlooked in political discussions.

“This issue does not seem to resonate with voters’ immediate expectations,” he argued.

Toofail also expressed concern that macroeconomic issues such as monetary stability and currency policies are sidelined in favor of more popular topics like employment, health, and education.

“The state of the currency market, however, has a direct impact on the cost of living and the resilience of the Mauritian economy against external shocks,” he explained.

Source: Defi Media