Mozambique: IMF concerned with increase in internal borrowing
Picture: A Verdade
The Bank of Mozambique has once again revised the Foreign Exchange Law to bring order to the financial sector and stop entrepreneurs speculating on foreign exchange earnings from exporting goods and services.
“What was happening was that certain agents outside the fundamentals of the economy were conducting foreign exchange auctions,” central bank governor Rogério Zandamela explained.
Since the entry into force of the Foreign Exchange Law in December 2017, the central bank had found that domestic and foreign intermediaries were taking advantage of gaps in the legal system to speculate with the millions of foreign currency earned through the export of goods and services with the aim of obtaining an advantageous exchange rate in the conversion of these amounts to meticais.
“What was happening was that certain agents outside the fundamentals of the economy, some of which were not banks, and including some exporters, were conducting foreign currency auctions. So we had to sort this out, because it was not clear from the notice that came out in December whether this was allowed or not,” Rogério Zandamela told a press conference following the last meeting of the Central Bank’s Monetary Policy Committee on the 22nd of last month.
Through order No. 08/GBM/2018 of 1 October, the governor of the central bank has determined that the conversion of export earnings of goods and services, income from investment abroad or any other funds received from abroad must “be made at the exchange rate of the banker’s purchase in force on the date and at the time of the transaction”.
According to the notice, to which A Verdade has had access, this rule applies not only to banks but also to natural or legal persons who are holders of rights and obligations in connection with foreign exchange transactions.
Zandamela said that, although Mozambique had flexible and free foreign exchange mechanisms, “there is no speculative space in which either exporter or economic agent uses the temporary monopoly it holds on foreign exchange currency – I receive 50 million and, instead of converting them normally with the bank where I have my accounts and which I use for transactions and my business, I start to speculate on the exchange and decide what exchange rate I want and on what basis”.
“Part of the speculative moves had to do with this. We had to sort this out and say: you have your banks and the determination of the exchange rate in this matter is a practical banking matter. It was a response to speculative moves.”
The governor of the central bank stressed that the foreign exchange system remained flexible, “but volatility when excessive is not good for our economy, or indeed for any economy”.
By Adérito Caldeira
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