Metical: No reaction to the injection of dollars from the Bank of Mozambique – A Verdade

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Metical: No reaction to the injection of dollars from the Bank of Mozambique – A Verdade

4:59 CAT | 20 May 2020

in file CoM

Metical remains unresponsive to the injection of dollars from the Bank of Mozambique

The Mozambican currency continues to depreciate, passing the threshold of 69 meticais to the US dollar despite the injection of US$500 million into the Interbank Foreign Exchange Market.

The Bank of Mozambique “introducing a foreign currency financing line for institutions participating in the Interbank Foreign Exchange Market, in the global amount of 500 million US dollars, over a period of nine months,” was one of the first measures taken to mitigate the effects of Covid-19 on the financial system and the economy.

At the time, the US dollar was being traded at around 67 meticais, and the central bank expected to create greater foreign exchange liquidity so that commercial banks could help their customers pay for imports, thereby reducing exchange rate fluctuations and promoting price stability for goods and services.

At the end of last week, the US dollar surpassed the 69 meticais threshold, and this Tuesday (19th) was trading at 69.33 meticais at the same Bank of Mozambique. In commercial banks, the exchange rate is already at above 70 meticais per US dollar.

Official inflation remains low, and “data collected in the cities of Maputo, Beira and Nampula, throughout the month of April of the current year, indicate that the country registered, compared to the previous month, an inflation in the order of 0.52 percent”.

“Analysing the monthly variation by product, we highlight the increase in prices of second-hand cars (5.4 percent), onion (15.0 percent), cooking oil (5.8 percent), capulanas (3.4 percent), horse mackerel (2.5 percent), fresh chicken eggs (12.1 percent) and brown sugar (7.0 percent),” the National Institute of Statistics reported, on the basis of data collected at official markets in urban areas.

The majority of Mozambicans, however, live in rural areas, where the price of brown sugar, for example, increased by almost 100 percent.