A stronger rupee affects exports

During the past six months, the local currency has appreciated by 12% against the US currency, the exchange rate falling from Rs 38.80 in January to Rs 33.90 on August end. Let us take stock of fluctuations in the local currency against currencies during the period from December 30, 2016 to September 5, 2017. According to data from the Bank of Mauritius, the rupee rose by 8.4% against the US dollar, rounding up to Rs 32.52.

The repo rate has been lowered from 4% to 3.5%. This was announced by Bank of Mauritius Governor Ramesh Basant Roi at a press conference on Wednesday following the meeting of the Monetary Policy Committee (MPC). The Monetary Policy Committee of the Bank of Mauritius cuts the Key Repo Rate by 50 basis points. Ramesh Basant Rai revealed that the decreased in repo rate has been done after considering factors like rate of inflation, private investment and exports. Will this change the situation? Can Mauritius at this stage afford appreciation of the rupee? What next step to boost up our export sector and investment?

Lilowtee Rajmun-Jooseery : “We have been struggling”

Following the appreciation of the local currency, the director of Mauritius Exports Association (MEXA) Lilowtee Rajmun-Jooseery did not hide her concern on the decline in competitiveness of Mauritius’s exports sector. “Mauritius is an export- led economy and we have been struggling to attract orders from overseas as the rupee exchange rate continues to rise against the dollar. This can only negatively affect the productive capacity of companies whose machines are not running at full speed or are downright inactive. The rise in our currency does not affect only the textile industry but also affects the hotel and service sectors.”

She reveals that today, more than 52% of exports are denominated in dollars, thus exposed to the risks of the exchange rate of the US currency. “This situation comes at a difficult time for our export already down by 11% from January to June, notably with the impact of Brexit on our exports in Britain and a timid recovery of the South African economy. Moreover, our competitors like Bangladesh, Vietnam and China have already depreciated their internal currencies.”

She has welcomed the decrease in the repo rate and rates it as being favourable. “This has slightly decreased the burden. We hope this will have an impact on the value of the rupee in the coming days.” 

Azad Jeetun : “We need to boost our productivity”

Economist Azad Jeetun argues that the world economy itself has slowed down and already in a difficult situation, hence Mauritius need to boost its productivity and be more competitive. “If our rupee is being appreciated, then we need to be more competitive. If our rupee is gaining value, our workforce and our expenses are increasing, then the revenue will automatically, decrease. For example, if a tourist visits Mauritius, the hotel instead of receiving Rs 50 will get Rs 45 because of a weaker pound. In terms of economic reality, there are many factors that explain how the rupee becomes strong. This appreciation of the rupee is based notably on the competitiveness of the economy, the growth that is generated, but also on business and investment. ”

Besides, he further explains that the decrease of repo rate will only ease the situation of the companies and it is not a solution for the appreciation of the rupee. “The decrease of the repo rate affects the interest rate. It influences the interest rate. Companies pay less interest and hence act as complementary though it is not a solution to the value of the rupee. With the decreased of repo rate, our investment will be good. We expect a good economic growth in different sectors. In our current situation, we need to be more competitive and productive to be able to boost up our exports.”   For him, the solution for the appreciation of the rupee is to produce more for exportations.