Fuel, bread shortage risks prompt Mozambique FX rule change – Bloomberg

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Fuel, bread shortage risks prompt Mozambique FX rule change – Bloomberg

8:53 CAT | 08 Apr 2025

File photo: VOA Português

Mozambique’s central bank announced temporary measures to ease a dollar crunch that hit fuel supplies and threatened to trigger bread shortages in the southeast African nation.

The Banco de Moçambique increased the proportion of revenues that exporters must convert to local currency to 50% from 30%, it said in a statement late Wednesday.

That marks a walkback after Governor Rogério Zandamela last week dismissed concerns of foreign currency shortages. Since then, there have been reports of fuel pumps running dry, and bakers warning of dwindling import wheat supplies.

“We don’t have wheat flour and we can’t make bread without it,” Victor Miguel, head of Mozambique Bakers Association said by phone before the central bank’s announcement. “What’s going to happen is we are going to not have bread available. This is really serious.”

Mozambique’s main business lobby has raised the alarm over dollar shortages. Earlier on Wednesday, it called for an increase to the conversion-rate for exporters, saying the move should immediately boost foreign exchange flows by around $750 million. That would easily cover a dollar-demand backlog that companies said stood at $373 million in February.

The Confederation of Economic Associations also urged the government to compel large exporters, who have special arrangements with it, to repatriate their revenues to resolve the dollar shortages.

Local businesses have complained for months about the lack of dollars for imports.

The shortages risk heightening social tensions that intensified after October’s disputed elections. At least 361 people have died in the unrest, according to the Decide Platform, a local monitoring group.

Part of the reason for the foreign exchange scarcity is that the currency is being propped up.

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The nation has a “de facto stabilized arrangement” for the metical, according to the International Monetary Fund. By November, the local unit was overvalued by as much as 40%, with the real effective exchange rate near the highest since 2015, S&P Global Ratings said at the time.

The government is also working with the central bank and commercial lenders to resolve the fuel shortages by issuing guarantees for purchases, state-owned media including the Noticias newspaper reported this week, citing Minister of Mineral Resources and Energy Estevão Pale.

João Macandja, the head of Mozambique’s state fuel imports company, Imopetro, and a finance ministry spokesman declined to comment.

Source: Bloomberg