Mozambique: Businesses pledge to submit evidence of foreign exchange shortage to the central bank

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Mozambique: Businesses pledge to submit evidence of foreign exchange shortage to the central bank

2:48 CAT | 07 Feb 2025

File photo: VOA

The private sector is to submit overdue invoices to the Bank of Mozambique as evidence of the shortage of foreign currency in the foreign exchange market.

The decision was announced yesterday by the chairman of the Confederation of Economic Associations of Mozambique (CTA), Agostinho Vuma, at a press conference, in which the CTA accused the central bank of being “insufficiently sensitive” to the problems of companies.

“We want to prove these allegations. Liquidity swap operations between commercial banks in the Interbank Foreign Exchange Market, despite a slight recovery in the fourth quarter of 2024, fell when compared to 2023 and 2022,” Vuma argued.

He explained that foreign currency liquidity swap operations between banks reached historic lows in the second quarter of 2024 to an estimated US$5.5 million, indicating liquidity constraints.

In operations between banks and customers, the purchase and sale aggregate grew by 13% from the first to the third quarter of 2024.

This growth was mainly due to the increase in purchases of foreign currency by banks from their customers, which rose by 18%, contrasting with a 7% growth in sales to customers.

In the same period in which banks’ net purchases increased, net foreign assets decreased. Over a two-year period, the fall was 47.5%.

Vuma believes that the accumulation of external obligations of banks, combined with the scarcity of sources of foreign currency, such as the reduction in liquidity swaps and the end of central bank interventions in the foreign exchange market, led banks to increase net purchases of foreign currency from their customers.

“In this case, viewing these net purchases by banks only as a positive foreign exchange position may be misleading if one does not take into account the obligations to which this position should be applied,” Vuma stressed.

Source: Notícias