Mozambique: Bank reserves fall in April

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Mozambique: Bank reserves fall in April

6:01 CAT | 21 Jun 2024

Image: Banco de Moçambique

Reserves held by Mozambican banks fell to 254,290 million meticais (€3,685 million) in April, after hitting a record high the previous month, according to central bank data accessed by Lusa on Thursday.

According to a Bank of Mozambique statistical report, the volume of reserves compares with the record 255,158 million meticais (€3,698 million) in March of this year, therefore declining by 0.3% (868 million meticais/€12.5 million) in one month.

Mandatory reserves for commercial banks held at the central bank were set by the Bank of Mozambique in January 2023 at a ratio of 10.5% in national currency and 11% in foreign currency, but this figure was increased in the first six months of 2023, on the grounds that it was necessary to “absorb excessive liquidity in the banking system, with the potential to generate inflationary pressure”.

The latest increase – to 39% of deposits in national currency and 39.5% in the case of foreign currency – came in June last year.

In the 12 months to the end of April this year, the volume of these mandatory reserves made by Mozambican banks grew by 53.3%, a figure that rises to 306% since the end of December, 2022, when they amounted to just 62,144 million meticais (€900 million).

After the second increase in these coefficients, the Confederation of Economic Associations of Mozambique (CTA) said last year that the decision made it even more expensive to secure bank financing, essential in an economy of small and medium-sized companies, which would therefore face even more challenges.

Mozambican economists interviewed by Lusa at the time also considered the central bank’s decision to increase the mandatory reserve coefficients “harmful” for companies, pointing out that the measure “would not resolve” the inflationary spiral, because this “variable” was conditioned by “structural problems”.

Source: Lusa