Mauritius Seeks Inner Peace Through SWF – Sort Of

Ashby Monk

Feeling stressed? Feeling like you’re living in a world that is totally out of control? Try this: picture yourself on a gorgeous beach, take a deep breath, and repeat after me, “Calm blue ocean…” Breath. “Calm blue ocean…” Now open your eyes. You’re feeling better right?

Wrong. Especially if you live in a tiny island nation that depends almost entirely on tourism revenue and export-oriented sectors (e.g. textiles and sugarcane). In fact, thinking about a calm blue ocean (like the one encircling your country) probably leaves you feeling pretty vulnerable to global forces. Put simply, your economic and social wellbeing is based on the willingness of foreigners visiting your country and buying your products.

What to do? How do you manage the stress and uncertainty of this precarious position? Increasingly, “inner peace” is achieved by setting up a sovereign wealth fund, which serves to bolster domestic plans and institutions in an uncertain–and increasingly globalized–world. We’ve seen several Island nations take this route; Singapore and Bahrain jump to mind. Significantly, Mauritius now wants to do the same. Villen Anganan of Bloomberg has the scoop:

“Mauritius is considering setting up a sovereign fund to help reduce currency fluctuations….Industry Minister Dharambeer Gokhool said, ‘There is a need for greater stability and predictability of the exchange rate.’”

Over the past two years, the Mauritian rupee has experienced a great deal of volatility vis-à-vis the dollar; down over 11 percent in 2008 and then up nearly 5 percent in 2009. This has made long-term budget planning very difficult. As such, the new SWF is meant to help smooth exchange rates (ostensibly by facilitating central bank operatations and sterilization) so the government can be more certain about the country’s long-term economic plans.

Now. Picture yourself on a gorgeous beach and repeat after me, “sovereign wealth fund…sovereign wealth fund…”

(Photo by subzi73)

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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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