Metical foreseen devaluing to 66 per US dollar by 2020 – consultancy

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Metical foreseen devaluing to 66 per US dollar by 2020 – consultancy

5:20 CAT | 05 Sep 2019

File photo: Lusa

Consultant Fitch Solutions is forecasting that the Mozambican currency will devalue to 62.8 meticais to the US dollar this year and 66 dollars by 2020 because of increased import spending and accelerating inflation.

“The trade deficit will continue to create downward pressure on the Mozambican currency,” argue analysts at Fitch Solutions, which owned by the same group that owns the Fitch ratings agency.

According to an analysis on the direction of the metical sent to customers, and which Lusa has seen, “the metical should remain relatively stable until the end of this year, after having registered a value of 62.8 meticais per US dollar, against 60.4 meticais per US dollar in 2018.”

Although they believe that depreciation will be gradual, and that the central bank is well positioned to support the metical, Fitch Solutions analysts write that “rising food prices should lead inflation from an average 3.9% in 2018. to 4.4% this year and 5.9% in 2020.”

“Our main scenario shows a gradual long-term depreciation of the metical” and a reference interest rate declining to 12.25% by the end of this year, analysts conclude.

Source: Lusa