Mauritius’s central bank plans to purchase foreign currency in the domestic market to boost its reserves and provide a stronger buffer against external shocks, Bloomberg reported.

The target is to reach $8 billion by June next year and then raise its holdings to $10 billion over time, provided there is no other market upheaval, Bank of Mauritius Governor Harvesh Seegolam said in an interview.

International reserves stood at $6.67 billion in June compared with a high of $8.56 billion in December 2021, data from the Port Louis-based Bank of Mauritius show.

“The objective for us is to have more months of import cover that gives the country more buffers,” Seegolam said in the interview.

“We were able to walk through the very difficult years of Covid because of the buffers that we had. Now is the time to rebuild them", he said.

The move signals a change in direction from the sale of foreign-currency aimed at stabilizing the domestic market because of the drop in capital inflows and tourist revenue into the Indian Ocean island nation caused by the pandemic-related slump.

The central bank injected only $50 million into the market in the first half of the year compared with $489 million for the same period in 2022.

Inflows picked up “significantly” in 2023, Seegolam said, boosted by income from tourism.

Tourist arrivals - mostly from Europe - surged 58% to 596,446 in the first half compared with the year-ago period, the national statistics agency said earlier this month.

Tourism revenue in the Indian Ocean island surged almost 70% to $779 million in the first five months of the year compared with the same period in 2022, the central bank said last week.

(Editing by Brinda Darasha;