Business
Decisive Structural Reform Can Reverse 5 Years of Mauritian Rupee Depreciation
The Mauritian Rupee (MUR) market is heading into the end of December 2025 with “prudence dominating” expectations, as analysts warn the foreign exchange (FX) market is “completely dislocated” and suffering from a persistent shortage of foreign currency.
Acute Currency Market Fragmentation
The most critical issue is the fragmentation of the Mauritian FX market, where multiple rates for the US Dollar/Rupee (USD/MUR) now coexist:
- The official rate, influenced by the Bank of Mauritius (BoM), but where liquidity is described as “quasi non-existent.”
- The money changers’ rate, typically about one Rupee higher than the official rate.
- The offshore rate, practised by international counterparts, which hovers around MUR 49 to one US Dollar.
Economist Sameer Sharma emphasized that this fragmentation would “continue to weigh on confidence” and visibility for the Rupee, noting that many large currency holders prefer to keep their dollars or euros rather than converting them.
End-of-Year Forecasts and Stability Concerns
Cédric Béguier, Head of Investment Strategy at AXYS, projects a central scenario of “relative stability” until the end of December, supported by an influx of FX from the tourism sector and a stable Dollar Index (DXY) in the 99–101 range.
His working forecasts for the end of 2025 are:
- USD/MUR: 45.5–46.5
- EUR/MUR: 52–55
- GBP/MUR: 59–61
Mr. Béguier cautioned, however, that the influx of tourist FX can be quickly neutralized by year-end import payments and outgoing dividends, meaning “punctual tensions on large amounts remain probable.”
Access frictions persist for some importers, creating a “two-speed market” between the official rate and actual currency availability.
Structural Weakness and Historical Trend
The Rupee’s current situation is part of a five-year pattern of depreciation followed by relative stabilisation.
- The USD/MUR rate reached a peak of 47 to 48 in early 2025 following the 2020–2022 global shocks before stabilising around 46 in the second half of 2025.
- Alexandre Sanchini, CEO of Blue Ship Capital, pointed out that the Rupee has experienced a moderate decline of -15% against the Dollar and -12% against the Euro over five years—a structural decline of 2% to 3% per annum consistent with long-term trends.
Mr. Sanchini argued that moderate depreciation is not entirely negative, as it can improve the competitiveness of Mauritian exports and services internationally, suggesting the priority is evolution “without excessive volatility.”
Credibility Crisis and Policy Recommendations
The consensus among experts is that structural reforms are the only path to potential Rupee appreciation, due to the erosion of the central bank’s credibility following the injection of approximately Rs 18 billion into the system since 2019, which contributed to a 10.4% depreciation of the Real Effective Exchange Rate (REER).
Short-Term Stabilisation
Mr. Béguier recommends the BoM should:
- Systematically publish the volume and clearing price of its regular market interventions to reduce speculation.
- Encourage the interbank market and the use of hedging instruments to improve liquidity flow.
Long-Term Appreciation
Economist Sameer Sharma and Mr. Béguier stress that long-term stability requires:
- Maintaining inflation around 3.5%.
- Attracting stable capital flows, like Foreign Direct Investment (FDI) in productive sectors beyond real estate.
- Structural reforms from the government, including increased privatisation and free competition.
Sharma concluded that the BoM is limited by a balance sheet “encumbered by overvalued assets” of the Mauritius Investment Corporation (MIC), and without governmental commitment to real structural change, hoping for a stronger Rupee is “illusory.”
Source: Defi Media
