Mozambican entrepreneurs criticize Central Bank for “announcing measures gradually”

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Mozambican entrepreneurs criticize Central Bank for “announcing measures gradually”

9:29 CAT | 03 Dec 2015

Lusa Moçambique / Luis Sitoe, CTA's chief executive.

The Confederation of Economic Associations of Mozambique (CTA) yesterday criticized the Central Bank for “announcing measures gradually,” increasing the uncertainty among Mozambicans entrepreneurs in the face of the threats facing the country.

“Our major criticism of the Central Bank is that it announces monetary measures gradually, which creates uncertainty because you never know what will be announced next week,” the executive director of the CTA Luis Sitoe told Lusa yesterday at the first Soico Mozambique Economic and Social Forum (Mozefo), which began in Maputo on Wednesday.

Sitoe called for “more clarity” on the Bank of Mozambique measures, stressing that “it would help the private sector draw up an agenda” at a time when the metical faces a more than 40 percent devaluation against the dollar since the beginning of the year and an associated fall in the price of raw materials with its concomitant impact on the availability of foreign exchange and inflation.

“Every week we are faced with new changes and it does not create confidence. It suggests that something is not well and is not being revealed,” he said.

The Bank of Mozambique stated on Monday that it would limit the use of debit and credit cards abroad to avoid the leakage of foreign exchange.

“We will establish limits on the use of credit and debit cards abroad,” the governor of the Bank of Mozambique, Ernesto Gove told a press conference, adding that banks would be instructed to overhaul their IT platforms in order to facilitate the new measures.

Recognizing that the Bank of Mozambique knows what suits the country best in the field of monetary and exchange rate policy, the CTA’s chief executive said that the use of debit and credit cards abroad was a simple way for business people to obtain foreign currency.

“Now we have to see whether the measure will have implications on expenditure on goods and buying services that are not available in our market,” Sitoe said, warning that if the central bank’s measures do not lead to a reduction in demand, “people will just start going to the bank looking for foreign currency, or to the parallel market, which will be detrimental to the economy”.

Sitoe said that, before the present currency crisis, entrepreneurs needed only one day to obtain foreign exchange, but now they have to wait more than ten days, with no guarantee that they would get the full amount.

At the press conference held on Monday, the central bank governor referred to the “exceptional circumstances” that the Mozambican economy is experiencing, and which imply a need for a change in consumption habits and import behaviour.

Gove said that Mozambique will have to find ways for its exports to generate foreign exchange, and must underwrite the production cycle in raw materials and equipment as well as the availability of essential consumer goods, while simultaneously insisting on the transformation of the economic model.

Despite the threats facing the country, “the macroeconomic fundamentals are not shaken,” he said, noting that in addition to the decisions already taken in mid-November to review the interest rates, the central bank will pursue fiscal measures and reinforce others to maintain supervision so as to ensure that inflation remains low and the economy stable.

On Tuesday, the Mozambican government approved a package of incentives for the production of food and also action to control the exchange rate.

“These measures include stimulating domestic production of food and services, exchange rate practices to prevent speculation and aggressiveness in the pursuit of foreign exchange abroad,” said the cabinet spokesman.

Source: Lusa Moçambique