Africa-Press – Mauritius. Mauritius is a popular holiday destination for South Africans lured by its sandy beaches and turquoise waters. And although it’s being reported that tourism is picking up for the Indian Ocean island post-COVID, it seems this important revenue stream needs a further boost.
Bruce Whitfield asks Africa analyst Ronak Gopaldas (Director, Signal Risk) about the currency crunch Mauritius is experiencing right now. At face value it doesn’t really make sense, particularly when you look at their external balances and their foreign reserves.
. Mauritius has one of the highest levels of import cover around Africa. . . so this has really raised eyebrows around the Bank of Mauritius’ classification practices. . .
There are questions around whether the currency crunch is being driven purely by economic factors or whether there is something else going on says Gopaldas.
The realities on the ground are quite concerning because it’s creating this inflation loop. . . businesses are not able to access foreign exchange which increases the costs for importers which are then passed on to consumers.
Ronak Gopaldas, Director and Africa analyst – Signal Risk He believes if all the contributing factors are taken into account, the situation can be explained.
These include the structural dimension considering that Mauritius is a small, open island economy. “It runs twin deficits so it is always going to be somewhat vulnerable to external dynamics.
” Also the island’s two main foreign exchange generators – investment and tourism – have been underperforming, Gopaldas points out.
Foreign direct investment (FDI) dipped to a four-year low last year, plus compared to 2019 where it got 1,4 million tourist arrivals, last year it only got 180 000.
. And the central bank hasn’t exactly covered itself in glory managing the situation, with random sporadic interventions. . .
A tourism bump could hopefully trigger a virtuous circle of stability in the markets, but then you also need policy consistency and credibility from the monetary policy authorities.
. and then over the longer term the structural changes need to be addressed.
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