Bank of Mozambique considers economic prospects increasingly uncertain

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Bank of Mozambique considers economic prospects increasingly uncertain

2:37 CAT | 18 Jun 2020

in file CoM

The Bank of Mozambique on Thursday considered that economic prospects for the near future are increasingly uncertain as a result of the Covid-19 pandemic and the military conflict in Cabo Delgado, north of the territory.
Since the last CPMO meeting, on April 16, “the risks and uncertainties have worsened significantly,” the Monetary Policy Committee (CPMO) statement reads.

“Internally, the restrictions imposed in the context of the prevention of Covid-19 and military instability, especially in the northern part of the country, could severely affect economic performance in 2020, in a context in which external demand for national products is increasing lower,” Mozambique’s central bank notes.

For 2021, “a smooth resumption of growth is expected, based on the gradual normalization of the pandemic”.

“In the first quarter of 2020, the economy grew 1.7%, after 1.5% in the last quarter of 2019”, it said.

With regard to currencies, the market has enough “to support economic activity in the short and medium term”.

“Since April, the national banking system has bought foreign currency on the domestic market for US$1,096 million [€975 million] and sold its clients a total of US$1,022 million [€909 million], which resulted in a surplus of US$74 million [€65 million],” the report details

The exchange rate continued to depreciate, “although at a slower pace in recent weeks”.

In the same period, international reserves increased by US$321 million (€285 million) to a balance of US$4,000 million (€3,560 million), “a figure that allows us to cover more than six months-worth of imports”.

Liquidity remains at high levels in the interbank money market, the central bank says.

“The Covid-19 mitigation measures may affect the profile of public accounts, but it is expected that a significant part of the pressure will be minimised by the support of cooperation partners,” the statement concludes.

The assessment was made at a meeting during which the Mozambican banking regulator reduced the monetary policy interest rate (MIMO rate) by 100 basis points to 10.25%.

The next regular CPMO meeting is scheduled for August 20.

By Thursday, Mozambique had an accumulated total of 651 cases of Covid-19 with four deaths and 169 reported recoveries.

Source: Lusa