Mauritius’s central bank has made “significant progress” rebuilding its reserves, Bank of Mauritius Governor Rundheersing Bheenick said.
In June, the bank said it would buy as much as $900 million to increase the country’s import cover to 6 months from 4 1/2 months. The decision to buy more dollars to boost reserves wasn’t aimed at “depreciating the currency,” which is “not a sustainable solution,” Bheenick told reporters today in Port Louis, the capital.
“We were never in the market to provoke an uncontrollable slide in the rupee,” he said. “We had to have a controlled approach to it.”
A prolonged debt crisis in Europe and a weaker euro is triggering losses for hotel operators and manufacturers, fueling exporters’ calls for a devaluation. The rupee has weakened 4 percent against the dollar since the decision to rebuild reserves was announced on June 9, according to data compiled by Bloomberg.
The rupee weakened as much as 1.4 percent to 31.175 a dollar and traded 0.2 percent lower to 30.80 by 3:11 p.m. in Port Louis.
Depreciating the currency to bail out key businesses would be “grossly unfair,” Bheenick said. Instead, the central bank will provide a special line of credit of 600 million euros ($736 million) to help hotel operators and manufacturers convert their foreign-currency debt.
The central bank’s intervention in the domestic foreign-currency market has corrected a “misalignment,” in the rupee’s exchange rate, Bheenick said.
“For the time being we are quite comfortable with it,” he said.
Foreign-exchange reserves rose 6.7 percent to $2.85 billion by the end of July, compared with two months earlier, according to central bank data.
Mauritius, a net importer of food and fuel, purchases mostly in dollars while the euro accounts for about 41 percent of foreign-currency income, according to central bank data. Annual inflation declined to 3.7 percent in July, a 21-month low, Statistics Mauritius said on Aug. 6.
The depreciation hasn’t had a “direct inflationary impact,” Bheenick said.
The central bank is no longer betting on 3.8 percent growth this year, Bheenick said. “On present trends, it will be closer to 3 percent.”
The Indian Ocean island’s economy is growing at the slowest pace in three years, after the sovereign debt crisis in Europe curbed tourist arrivals. Visitors for the first six months through June rose 0.5 percent, compared with a 1.6 percent forecast. Sales of manufactured goods advanced 1.2 percent to 22.6 billion rupees ($714 million), according to cabinet papers released on July 20.