Metical increasingly fragile against the dollar

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Metical increasingly fragile against the dollar

12:50 CAT | 06 Nov 2020

The United States dollar (USD) continues to appreciate against the national currency, the Metical. According to the Bank of Mozambique’s daily exchange rate, US$1.00 is being purchased at 72.6 Meticais, and two Meticais more to sell.

Calculations by Standard Bank Mozambique’s Chief Economist, Fáusio Mussá, cited by Lusa, indicate that the US dollar closed October at 73.24 meticais, “up by 19.1% year-to-date”, that is, since the beginning of the year, “and by 16.5% year-on-year”, that is compared to October of last year.

In view of the current political and economic situation, characterised by armed attacks in the centre and north of the country and the pandemic crisis, Mussá predicts that the appreciation of the US dollar against the national currency will continue until the end of the year, where it could reach 77 Meticais per US dollar.

The US dollar is not the only currency appreciating against the Metical. The Euro and the Rand are appreciating too. If, at the beginning of last September, one Euro was bought at 83.6 Meticais and sold at 85.4 Meticais, today (and according to the exchange rate of the central bank), the currency is now being traded at 85.1 Meticais and 86.8 Meticais, buying and selling respectively.

In September, the Rand cost the buyer 4.2 Meticais and was sold at 4.3 Meticais, but in the current month, the South African currency appreciated against the Metical and is now being bought at 4.5 Meticais and sold at 4.6 Meticais.

The lower the value of the national currency, the higher the cost of living for families and businesses. A priori, it appears that the continued depreciation of the Metical results, to a large extent, from the impact of the pandemic crisis on the country’s economy.

To reverse the currency devaluation scenario, the Standard Bank economist calls for efforts for peace, and reforms that allow investment outside the mineral resources extraction sector.

By Evaristo Chilingue

Source: Carta de Moçambique