Metical value and international reserves continue to fall

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Metical value and international reserves continue to fall

11:10 CAT | 27 Sep 2016

Latest information from the National Statistics Institute (INE) shows that the metical recorded losses against the US dollar in all segments of the domestic foreign exchange market in the second half of August.

In the Interbank Foreign Exchange Market (covering transactions between the Bank of Mozambique and commercial banks) the US dollar cost 72.96 meticais.; in commercial banks, the dollar was selling for 75.21 meticais and, in currency exchange shops, for 76.48 meticais.

The increase in the dollar value has significantly raised the price of imported products paid for in the US currency over the last two years, a situation typical of high dependence on imported products.

The depreciation of the metical has also automatically raised the values of Mozambique’s overseas debt commitments. Until September 2014, a dollar was worth about 30 meticais, a figure that has been growing ever since, having increased to about 40 meticais in September last year and to values above 76 meticais today.

The metical/dollar exchange rate increased by 1.79 percent in the second half of last August compared to the first half of the month, with the differential between the average rate of commercial banks and the MCI increasing 440 basis points to 3.08 percent. In the same period, the value of the metical increased by 1.52 percent against the euro and fell by 6.15 percent against the rand. The metical has been experiencing sharp devaluation against the South African currency, raising the cost of consumer goods, especially food, imported from the country.

International reserves continue to fall

Mozambique continues to experience a reduction of net international reserves (foreign currency reserves), a factor that reduces the country’s ability to respond to external shocks and the challenges of its economic relations with foreign countries, especially the ability to pay debts and buy imports.

Preliminary INE information points to a reduction in reserves of 52.7 million dollars in the second half of August, leaving a balance of US$1,769 million, as a result mainly of commercial banks’ net transfers amounting to US$15.8 million dollars, net sales of US$12.2 million to commercial banks at MCI and amortization of foreign debt in the amount of US$11.5 million, in a context of entries for state projects worth US$6.2 million and purchases to Foreign Direct Investment companies (FDI) worth US$ 2.2 million.

Prior to the Amending budget, the government had intended holding Net International Reserves of US$2,251 million dollars, corresponding to 4.3 months of import cover, excluding megaprojects, but the Amending budget officially reduced cover to only three months’ worth of imports.

Source: O País