Bank of Mozambique to limit use of credit card abroad, discards administratively set exchange rates

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Bank of Mozambique to limit use of credit card abroad, discards administratively set exchange rates

10:21 CAT | 01 Dec 2015

Jornal Notícias

The Bank of Mozambique (BM) yesterday announced measures to contain the pressure currently exerted on the foreign exchange market for the major currencies traded in the country.

The Governor of the Central Bank, Ernesto Gove, said the central bank would set limits on the use of debit and credit cards abroad, and commercial banks would be instructed to adjust their IT platforms to implement the new regulations.

The measure addresses the current use by cardholders of debit and credit cards to pay for goods or services abroad without restriction, draining the country of foreign currency reserves.

To illustrate, the governor said that vehicle imports increased from US$291 million in 2010 to US$567 million last year, an increase of 94 percent.

This was happening at a time when Mozambique’s balance of payments scale was recovering from the chronic deficit it had incurred due to internal and international conditions.

Speaking at a press conference, the governor said: “It is an exceptional time, and we need to take steps to adjust our expectations and the functioning of markets.”

The Central Bank is also committed to strengthening banking supervision and ensuring that foreign exchange regulations are strictly observed.

But even in this unfavourable situation, Ernesto Gove said there was no reason to despair, and that the country’s macro-economic fundamentals had not been shaken. The Bank of Mozambique, said the governor, holds respectable levels of international reserves, sufficient to cover three months of imports.

Gove also rejected introducing administratively set exchange rates, which had been proposed by the private sector as a way of minimizing the impact of exchange rates fluctuations on imported factor goods, arguing that such a measure would not be beneficial for the economy.

“We could end up in a situation where we had money but no products, and has happened in the past. Measures of this kind lead to hyper-inflation. What we need is to solve the current problem globally and sectorally, through a combination of government, central bank and private sector efforts, in order to become more competitive in the region and the world and take advantage of our strategic location,” Gove said.

Source: Jornal Notícias