The rupee continues to depreciate against the US Dollar and the Euro, reflecting excess forex demand. The official exchange rate is artificially managed by the BoM and the banking system through an informal exchange control regime, and by BoM decisions to intervene or not in the foreign exchange market.
Since the beginning of 2026, BoM has intervened only thrice, in January, March and April for a total of only USD 40 million at around Rs 46 per USD. The USD has now crossed a new peak level of Rs 48.50, representing a 4% depreciation over the first half of 2026, but remains below the unofficial or offshore exchange rate. Reaching the Rs 50 mark soon!
BoM brags about its record amount of forex reserves, inflated by foreign borrowings and gold valuation gains, but chooses not to intervene to sell US Dollars and stabilize the rupee. Raising the Key Rate by 25 basis points still leaves an unfavorable differential between domestic and foreign interest rates, and the rupee remains under pressure.
Which seems to suit BoM as the current financial year comes to a close at end June 26 !!! Rupee depreciation in the first six months of every year is a repeated and deliberate means to reap valuation gains on BoM forex reserves, and to boost BoM capital and internal reserves. What’s a little currency depreciation between friends, if it can dress up the BoM’s balance sheet. Otherwise, a BoM loss might start sounding like Silver Bank or MIC disasters.
As shown in the table below, the rupee has depreciated against the USD in the first half of every year as from 2018, except for the year 2025, an electoral year. The chart below also shows the rupee weakening in the first semesters, especially near the month of June.
Rupee depreciation fuels inflation. BoM of Mauritius tries to reconcile with its objective to combat inflation by engaging in a controlled official depreciation of the rupee. By allowing the rupee to depreciate, BoM is also supporting Govt to pursue a debt deflation policy through higher inflation.
Rupee deprecation increases indirect tax revenue on the higher rupee value of imports, as well as income taxation on the offshore sector. This is a short-term approach to tackle fiscal imbalances which then founders as Govt expenditure subsequently expands in line with inflationary pressures.
Current fiscal and monetary policies, as in the past, are merely kicking the can down the road. Amid the energy crisis and rising global economic uncertainty, mere tinkering of the rupee, interest rates, taxes, and government spending will not avert a serious outcome. 𝑾𝒊𝒕𝒉𝒐𝒖𝒕 𝒓𝒂𝒅𝒊𝒄𝒂𝒍 𝒇𝒊𝒔𝒄𝒂𝒍 𝒂𝒏𝒅 𝒅𝒆𝒃𝒕 𝒂𝒅𝒋𝒖𝒔𝒕𝒎𝒆𝒏𝒕, 𝒔𝒖𝒑𝒑𝒐𝒓𝒕𝒆𝒅 𝒃𝒚 𝒔𝒕𝒓𝒐𝒏𝒈 𝒎𝒐𝒏𝒆𝒕𝒂𝒓𝒚 𝒕𝒊𝒈𝒉𝒕𝒆𝒏𝒊𝒏𝒈, 𝒕𝒉𝒆 𝒓𝒖𝒑𝒆𝒆 𝒘𝒊𝒍𝒍 𝒄𝒐𝒏𝒕𝒊𝒏𝒖𝒆 𝒕𝒐 𝒔𝒐𝒂𝒓 !
