Metical reacts badly to general elections in Mozambique – A Verdade

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Metical reacts badly to general elections in Mozambique – A Verdade

3:19 CAT | 18 Oct 2019

in file CoM

The metical seems to have reacted badly to Mozambique’s October 15th general elections, depreciating further against the main foreign currencies. The metical, which in June had appreciated to 61.75 against the US dollar and 4.18 against the South African rand, was trading on Thursday (17) at 62.89 per US dollar and 4.24 per rand.

Since last year, the Bank of Mozambique has placed the peace agreement signed in August, and the presidential, legislative and October 15 provincial elections among the internal risks influencing its monetary policy decisions.

With inflation controlled, the foreign exchange market is the most up-to-date mirror of the expectations of the economy’s productive sectors – particularly the financial sector.

At the end of the second quarter of this year the metical had appreciated substantially. But after having stood at 64.63 per dollar and 4.60 per rand in April, on 18 June it was trading at 61.75 against the US dollar and 4.18 against to the South African rand.

Since then, good prospects have enlivened the Mozambican economy. An important investment decision was made on one of the Rovuma Basin natural gas projects, support for post-cyclone reconstruction Idai and Kenneth has begun to materialize, and the Government signed the third Peace Agreement with Renamo.

But the metical reversed its trend of appreciation. When the election campaign started the dollar was at 61.92 meticais and the rand at 4.06. The day before the vote, it was already at 62.82 and 4.24 respectively, and this Thursday it rose to 62.89 to the dollar and remained at 4.24 per rand.

More than who wins, electoral apprehension in Mozambique is about how Renamo will react to another defeat. On the other hand, this depreciation suggests that the US$880 million capital gains tax on transactions between Total and Occidental Petroleum have not yet entered the public coffers.