BANK OF MAURITIUS

FEBRUARY 2026  ·  ANALYSIS & COMMENTARY

The Bank of Mauritius:

From Dream Team to Institutional Crisis

Part I

An independent assessment of the Bank of Mauritius under its current senior leadership. Every factual claim draws on publicly available and independently reported sources.

I. The Inheritance: An Existential Challenge

THE Bank of Mauritius today carries wounds inflicted before the current leadership arrived — wounds that remain unaddressed. The story begins in 2020 during the COVID-19 pandemic with three decisions no central bank takes lightly. First, the BoM went to international capital markets to borrow US dollars to intervene in local FX markets, adding to the country’s external obligations and depleting usable reserves. Second, it printed rupees — expanding its balance sheet by Rs 80 billion — and deployed that newly created money as equity into the MIC. Third, and most controversially, the Bank of Mauritius Act was amended to allow the BoM to distribute unrealised FX revaluation gains — gains that had never been converted to cash — transferring Rs 60 billion from its Special Reserve Fund directly to the Government. The IMF and independent economists called it monetary financing by another name. It was a precedent-breaking transfer that permanently weakened the Bank’s financial independence. In total, Rs 140 billion was deployed from or through the central bank in a single year — embedding an illiquid investment fund inside an already strained balance sheet, a construction with no credible precedent in serious monetary institutions.

As a bailout fund, the MIC’s mandate was not inherently wrong. A small open economy facing the simultaneous collapse of its national airline, its airport, and its largest corporates had a legitimate case for emergency intervention. The flaws were in the design and the governance. The MIC purchased mispriced convertible bonds from systemically important corporates at yields far below any rational cost of equity — instruments structured to rescue, not to invest. The single largest deployment — Rs 25 billion for a 49 percent stake in Airport Holdings Ltd, owner of Air Mauritius, Airports of Mauritius, and Airport Terminal Operations Ltd — is now under a KPMG forensic audit. In the National Assembly in April 2025, PM Ramgoolam alleged the valuation had been inflated by Rs 41 billion in artificial goodwill. Whether those allegations are sustained, the damage to the Bank’s balance sheet is already visible, structural, and compounding.

The excess liquidity created by monetary expansion flooded the financial system — compounding a pre-existing problem from years of FX intervention — and permanently impaired the Bank’s ability to enforce its own policy rate. By holding illiquid domestic assets subject to credit impairments and write-downs, the Bank’s balance sheet weakened progressively — eroding equity, depleting net reserves, and draining the operational independence needed to intervene in markets. Net reserves fell significantly while the Bank continued to publish inflated gross reserve figures. A crisis of confidence hardened into the chronic FX shortage the market has endured for six years. Governance at the MIC was ailing from the start — the previous regime appointed the wrong people to run it. That problem has not been corrected under the current one.

The most visible symptom is the fragmentation of the FX market. There is no single MUR/USD rate in Mauritius — there are three. The official rate presents a picture of stability. The offshore market tells a different story: USD/MUR trades at 48 to 49, the true scarcity premium the market has priced in. Money changers fill the gap between what the banking system offers and what the street demands. In a functioning market, price reflects supply and demand. In Mauritius, it reflects access — who you know and which institution you bank with. For a country that calls itself an International Financial Centre, six years of a three-tier, rationed currency market is not a technical footnote. It is a structural failure. The First Deputy Governor bears direct institutional responsibility for financial markets and monetary policy implementation. Fifteen months in, nothing has changed.

The current leadership inherited all of this — and that context matters. But context is not exculpation. The IMF’s explicit call to de-consolidate the MIC from the BoM balance sheet remains unimplemented. No exit plan. No restructuring strategy for Air Mauritius or AHL. No roadmap to absorb the excess liquidity distorting the transmission mechanism. No credible programme to rebuild the balance sheet or resolve the asset and liability mismatch. The previous regime’s execution was deeply flawed. The current one has offered nothing better — and does not appear to possess the intellectual depth, the skills, or the technical experience to do so.

A central bank in crisis needs the best person available. What Mauritius chose instead was the most politically convenient one.

II. The Dream Team That Became a Disaster

When Rama Sithanen was appointed Governor in November 2024, alongside Rajeev Hasnah as First Deputy Governor and Gérard Sanspeur as Second Deputy Governor, the trio were presented as the solution to the institution’s existential challenges. The Prime Minister himself declared a dream team — at the Bank of Mauritius and at the Ministry of Finance. Within ten months, it had collapsed entirely.

A Stabilisation Built on Sand

The new leadership’s first claim was rupee stabilisation. It did not survive scrutiny. In 2025, the US Dollar Index fell approximately 10 percent from its January peak — one of the sharpest annual declines in over a decade, driven by the global market reaction to Donald Trump’s erratic tariff policy and Liberation Day. Every emerging market currency appreciated. The Mauritian rupee moved with the global tide, not because of anything the Bank of Mauritius did. Claiming credit was the equivalent of a ship’s captain taking a bow for a favourable wind. The structural reality on the ground was unchanged: three rates, a rationed market, no reform.

How can a currency be described as stabilised when the FX market operates at three different rates — official, offshore, and money changer — and USD is available offshore at 48 to 49? Stability is a claim, not a fact.

The Governance Implosion

What followed was worse. Gérard Sanspeur resigned in August 2025, publicly alleging that Governor Sithanen’s son was interfering in banking licence decisions, recruitment, and procurement. In September, the Prime Minister — who had coined the dream team narrative himself — declared Sithanen’s position untenable and asked him to go. Ten months. A governance crisis with no modern precedent in Mauritian central banking history.

The Titan Who Was Not

It has since emerged, through leaked WhatsApp communications reported in February 2026, that Sithanen reportedly described himself — or was described within his circle — as a “Titan.” The messages, attributed to Sithanen and Ashvin Deena, a senior MCB executive and fellow LSE alumnus of Sithanen’s son, allegedly reveal a coordinated effort to have a private banker at MCB dismissed — apparently because she was a friend of someone who had publicly challenged the Governor in the Pulse Analytics case. Both categorically denied the allegations — denials noted here. She was nonetheless suspended four days after the messages were reportedly sent, dismissed in December 2025, and her case is before the Employment Relations Tribunal.

The same pattern repeated. Sithanen used the Bank’s regulatory authority to block, for weeks, the appointment of former Governor Rundheersing Bheenick as SBM Chairman — legal commentators called the grounds irrational and ultra vires. In a further episode of overreach, the Bank’s own union president was suspended on a charge rooted in colonial-era vagrancy legislation — provisions with no legitimate application to any working professional today. The suspension letter was signed by Hasnah. The Employment Relations Tribunal ruled in favour of union recognition. The case remains before the courts and under active investigation by the public prosecutor. What began as internal discipline has become a matter of public law. These were not isolated misjudgements. They were a pattern of using institutional power for purposes the institution was never designed to serve.

The dream team narrative collapsed entirely. The First Deputy Governor, present throughout every month of this crisis and bearing institutional co-responsibility for the culture it produced, was not asked to account for his role. He remains.

The Arrogance That Compounds the Failure

There is a quality that connects both figures, and it is not competence. Sithanen embraced the Titan label with apparent comfort — a man who had been in high public office, who knew how institutions work, and who chose self-aggrandisement over the quiet discipline the moment demanded. It ended, predictably, in the manner Titans usually end: overreach, exposure, and a Prime Ministerial request to leave.

Hasnah presents a different but related problem. The public record suggests a disposition more consistent with assumed authority than earned confidence — a certainty about his own judgement that sits oddly against a career built entirely outside the disciplines the role demands. The deputy governorship rewards the opposite: knowing what you do not know; deferring to those who do; earning trust through demonstrated competence, not assumed authority. As FDG, Hasnah holds direct responsibility for financial markets and monetary policy implementation. The record — three FX rates, a foreign exchange shortage running for six years in a self-styled IFC, Rs 50 billion in unabsorbed excess liquidity, a broken transmission mechanism — speaks for itself.

Attending the London School of Economics does not confer values, ethics, or the instinct to lead with integrity. History is full of transformational leaders who built institutions and served the public good with distinction — without a prestigious degree. History is equally full of credentialled individuals who mistook the prestige of their education for character. What the Bank of Mauritius needs is not someone who can cite their academic pedigree. It needs someone who understands the weight of public responsibility, the limits of their own knowledge, and the difference between power and service. That does not come from any institution of higher learning. It comes from the person. The record shows what kind of person this appointment produced.

Behind every technical failure in this document lies a human cost. Since 2019, the Mauritian rupee has lost approximately 29 percent of its value against the US dollar — from an average of Rs 35.56 to around Rs 45.90 at the official rate today. Every imported good — fuel, medicine, food — costs that much more than it did six years ago. Inflation does not announce itself as a balance sheet problem. It arrives at the supermarket, the pharmacy, the petrol station. The purchasing power of ordinary Mauritians has been quietly eroded by monetary decisions made in an institution they were told was being managed by a dream team. The Bank of Mauritius has failed in its fiduciary responsibility to the people of Mauritius.

Mauritius deserves much better.

Part II — The Record, The Standard, and The System — to follow.

SOURCES & EDITORIAL NOTE

Key sources: IMF 2025 Article IV Consultation (Country Report No. 25/136) for MIC data and de-consolidation recommendation; Bank of Mauritius MPC Minutes (77th meeting, Feb 2026 and 75th meeting, Aug 2025) for excess liquidity, interbank rate, and transmission data; BoM MPC statement (Feb 2025) on excess liquidity; Défi Media Group (Feb 2026) for WhatsApp communications attributed to Sithanen; Défi Media Group and Mauritius Times (Jul–Aug 2025) for Bheenick/SBM blockage; Reuters and Bloomberg (Sep 2025) for Sithanen resignation; National Assembly records (Apr 2025) for PM Ramgoolam’s statement on AHL valuation.

EDITORIAL NOTE: Denials by Sithanen and Deena regarding the WhatsApp allegations are noted. No finding of fact is made on contested matters. FX rate references reflect market conditions as reported and observed in February 2026. The union president suspension case is noted solely as evidence of institutional conduct; no comment is made on proceedings before the courts or the public prosecutor.