“Digital Services/Currencies to the Rescue for Mauritius: Reinventing Trade Financing”

By Neekhil Bhowoniah | Consultant at the World Bank Group for Mauritius and Seychelles

“To me, the most beautiful word – and I’ve said this for the last couple of weeks – in the dictionary today is the word tariff,”  Donald Trump announced (October 25, 2024).

As promised, the return of Donald Trump to the White House did “make heads spin” as he signed a slew of executive actions on Day 1 as US President. And not to forget the 40% reciprocal tariff imposed on Mauritius on the so-called ‘Liberation Day’ (2 April). One thing is for sure: this political shift proves that Trump’s foreign policies have become the new status quo, with the U.S. being one of, if not the strongest global force at play. The question of which policies will come into effect poses significant trade uncertainty.

What do the projected macroeconomic indicators show? While the forecasted global GDP growth for 2025 is set at 3.3% – as indicated by the OECD Economic Outlook (2024) – on the other hand, the Global Economic Prospects Report (2025) published by the World Bank predicts a real GDP growth of 4.4% for Mauritius for the same year. However, on 08 May 2025, due to heightened uncertainty regarding future tariff hikes, the domestic growth outlook (for Mauritius) has been further lowered by the Bank of Mauritius – between 3.0% and 3.5% from a previous forecast of 3.5 to 4.0%. And from the international trade lens, tariffs are expected to dampen global trade growth by 2.4 percentage points for the year 2025 – as per the World Trade Organisation (WTO) Global Trade Outlook (2025).

No wonder the global macroeconomic landscape may grow more unpredictable with the Trump administration unleashing a wave of tariffs, generating a negative spillover to hit the international rules-based system within the framework of World Trade Organization (WTO) agreements to severely impact member states via regional and bilateral trade relations. Nonetheless, Trump’s foreign policy represents a window of opportunity for Mauritius. As a resource-importing nation, this is a wake-up call for the country to enhance digitization to reshape its trade dynamics and smooth out supply chains.

The race for digital money is already underway in various economies, and Mauritius cannot afford to be left behind. In June 2023, The Bank of Mauritius issued a public consultation paper on the Central Bank Digital Currencies (CBDC), and by the start of 2024, it embarked on a pilot project with a commercial bank. This represents a growing solution in the context of trade financing, mainly to weather global tensions and avoid volatile exchange rates. Indeed, finance leaders globally show strong interest in using different types of digital assets and blockchain-based currencies to create sustainable supply chains. It is estimated that by 2027, the adoption of CBDCs in Europe will reach 79%, and over 80% in other regions (as per the infographic below). Hence, Mauritius is on the right track. The adoption of the Central Bank’s CBDC can offer its domestic businesses (especially Small-Medium enterprises):

1. Improved security in cross-border transactions;
2. Access to new markets to generate new revenue opportunities;
3. Improved transaction speed with enhanced transparency; and
4. Cost savings

A glaring example is that of China. As a response to the ongoing trade tensions, China has rapidly been intensifying the adoption of CBDC, primarily to (i) create a hedging effect against US tariff barriers, (ii) enhance its financial sovereignty, and (iii) accelerate the internationalization of its national digital currency. Statistics provided by the People’s Bank of China show that, as of March 2025, the number of personal Yuan wallets had more than quadrupled (from 180 million to 800 million). This is indicative of improved trade financing systems, with a spike in the cumulative transaction volume by more than 40% – reaching 10.2 trillion from 7 trillion e-CNY (China’s digital Yuan), in less than a year.

“The race for digital money is already underway in various economies, and Mauritius cannot afford to be left behind”

Yet, we should remember that there are nuances. A region’s trade and investment culture will always be shaped by societal norms. Unlocking the potential of digital trade financing in Africa is still at an infancy stage of development, which is being challenged by infrastructural and policy issues. For instance, African participation in the WTO’s Information Technology Agreement (ITA) is currently extremely limited, and only includes four African countries: Egypt, Mauritius, Morocco and Seychelles. Moreover, the Electronic Transactions Act 2000 does not explicitly provide specific measures for consumer protection from unfair or deceptive practices with regard to the use of e-commerce. Therefore, there is the need to work out those current wrinkles mainly by placing policy emphasis on the high-performing regulatory frameworks that target mostly institutional stability, consumers, innovation, and most importantly sustainability.

Another alternative is re-globalisation through the African Continental Free Trade Area (AfCFTA). This features as a strong policy recommendation by the WTO Report in 2023, in which the AfCFTA is set to position African economies as a powerful voice for rules-based multilateralism on the global stage. As projected by the United Nations Conference on Trade and Development (UNCTAD), if improvement in digital trade services is realised within the AfCFTA, an increase of 128.4% in intra-African trade can be realised between 2024 and 2026. Following this, it is expected that Mauritius will benefit from an increase in real income of 2.4% in 2035 through the removal of non-tariff barriers to trade, including governance, infrastructure, border crossings, and prevalence of informal trade.