Mauritius faces an invisible bank tax with a 4.25% interest rate gap, hindering economic growth
In Mauritius, an analysis of economic facts reveals a significant issue: a 4.25% absolute interest rate gap, which is nearly four times higher than that of the Eurozone. This gap acts as an "invisible tax" on the country's vital forces, with a banking oligopoly accused of stifling local entrepreneurs and citizens. The article argues that lowering the key interest rate, a popular demand to stimulate growth, would be a macroeconomic error. Such a reduction would immediately diminish the purchasing power of savers and retirees by cutting savings account yields and accelerate the depreciation of the Mauritian rupee. Since Mauritius imports most consumer goods, a weaker currency would fuel imported inflation, severely impacting household budgets for essentials like food, fuel, and medicine. For local businesses, a weakened rupee would exacerbate the chronic shortage of foreign currency, making it difficult for SMEs to finance raw material purchases in USD or Euros. The notion that a weak rupee benefits exports is deemed an economic illusion for Mauritius, as export industries rely heavily on imported inputs, causing production costs to skyrocket with devaluation and negating any marginal sales gains. While a lower key rate might reduce variable credit costs, it would not address the fundamental problem of the 4.25% structural margin imposed by banks, which keeps capital costs exorbitant and discourages investment. The proposed solution, inspired by the Botswanan model, involves an
