Mozambique’s currency in circulation hits seven-month low

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Mozambique’s currency in circulation hits seven-month low

2:10 CAT | 02 May 2024

FILE - For illustration purposes only. [File photo: Notícias]

The currency in circulation in Mozambique (physical money) fell in February for the second consecutive time, to 55,798 million meticais (€818 million), its lowest for several months, according to data from an official report compiled by Lusa this Thursday.

Banknotes and coins in circulation in the country at the end of January corresponded to 57,061 million meticais (€836 million) and in the previous month to 62,494 million meticais (€916 million), according to a central bank statistical report.

The withdrawal of money from circulation is a common feature of contractionary monetary policy which reduces the money supply, normally used by central banks to contain price rises.

However, during this period, several problems were reported in the new Mozambican interbank network system, migration to which began in 2023, with recurring difficulties in payments and cash withdrawals at ATMs.

In the space of one month, Mozambique lost 1,264 million meticais (€18.5 million) of cash in circulation, dropping to the lowest value in at least seven months.

Mozambique recorded year-on-year inflation of 3% in March, a new consecutive monthly drop, said the country’s National Statistics Institute (INE).

INE data on the Consumer Price Index (IPC) indicate that Mozambique “recorded an increase in the general price level of around 3.03%” over 12 months, compared to March 2023, and that the Education divisions, Restaurants, hotels, cafes and similar, and Food and non-alcoholic drinks “were those that saw the biggest price increase, varying by 10.39%, 5.93% and 4.94%, respectively”.

Year-on-year inflation in February (12 months) was 4%; in January, 4.19%; and in December 5.3%.

The IPC report added that the country recorded a price increase of 0.03% in the space of a month, compared to 0.47% in February, 0.93% in January and 1.29% in December.

“The Clothing and footwear division stood out, contributing to the total monthly variation [in March], with around 0.04 positive percentage points,” it reads.

Mozambique closed the year 2023 with year-on-year inflation of 5.30% and an average of 7.1% over a year, according to previous data from INE, when the official government forecast was 7%.

In December, the Minister of Economy and Finance of Mozambique, Max Tonela, said that the country’s economy will have grown in 2023 by the equivalent of 5% of GDP (gross domestic product) and that it could reach 5.5% this year.

Inflation, according to government forecasts, should have stood at 7% last year, repeating the same value in 2024.

Source: Lusa