Mozambique: Liquidity in system sufficient after January changes, central bank says – Watch

Login

Register

http://www.clubofmozambique.com/

Mozambique: Liquidity in system sufficient after January changes, central bank says – Watch

11:43 CAT | 27 Mar 2025

Screen grab: Banco de Moçambique

The governor of the Bank of Mozambique, Rogério Zandamela, said on Wednesday that liquidity in the financial system, particularly in foreign currency, is sufficient, after the bank in January decided on a reduction in the coefficients, which he said it does not plan to repeat for the time being.

“At the moment we are calm about the level of liquidity that exists in the system; there is no need to touch on structural liquidity, messing with mandatory reserves,” said the governor, questioned by journalists at the end of the Monetary Policy Committee (CPMO) meeting. “We’re going to maintain it. It’s not something you play around with, with the coefficients.”

At Wednesday’s meeting, the CPMO cut its MIMO monetary policy interest rate to 11.75%, but kept the compulsory coefficients unchanged, with Zandamela justifying that the measure adopted at the previous meeting “freed up a lot of liquidity” in the sector.

On 27 January, the CPMO had decided to lower the rate from 12.75%, in force since the end of November, to 12.25%, while also cutting the coefficients of compulsory reserves in national currency from 39.0% to 29.0% and in foreign currency from 39.50% to 29.50%, in a move to provide “more liquidity to support the economy in restoring productive capacity and the supply of goods and services,” according to the bank.

“Just to give you an idea of the order, all this together, in meticais alone, we’re talking about at least fifty-five billion meticais [€798.2 million], and almost two hundred and fifty million [dollars, €231.8 million] in terms of foreign currency, which has been freed up for the normal functioning of the economy,” he said.

Faced with the lack of foreign currency on the domestic market, Mozambique’s businesses have in recent months pressed the central bank to ease the mandatory foreign currency reserve coefficients.

Lusa reported earlier this month that the mandatory reserves of Mozambique’s banks in December reached an all-time high of 307.847 billion meticais (€4.441 billion), up 15% in one year, according to data from the central bank.

According to data from statistical reports by the Bank of Mozambique – which has since eased the restrictive measures surrounding these reserves – the volume of these compulsory deposits made by the banks has broken consecutive monthly records over the last year and a half.

In September 2023, these mandatory reserves totalled 237.092 billion meticais (€3.420 billion) and between November and December 2024 alone they increased by more than 9%.

The mandatory reserves of commercial banks at the central bank were set by the Bank of Mozambique at 10.5% in national currency and 11.0% in foreign currency at the beginning of January 2023.

However, in the first six months of 2023, the central bank increased the coefficient twice in order to “absorb excessive liquidity in the banking system with the potential to generate inflationary pressure.”

The last of these increases took place in June 2023, with the coefficient raised to 39% for deposits in national currency and 39.5% in the case of foreign currency to be held in bank reserves.

Since the end of December 2022, when they totalled 62.144 billion meticais (€896 million), the volume of bank reserves held by the central bank has increased by almost 400%.