Mozambique: Banks’ mandatory reserves fell 28% in the first three months of 2025

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Mozambique: Banks’ mandatory reserves fell 28% in the first three months of 2025

1:20 CAT | 27 May 2025

File photo: Lusa

The mandatory reserves which Mozambican banks have to place with the central bank, based on deposits, fell 28% between January and March, to 209.902 million meticais (€2.936 million), according to data compiled by Lusa.

According to data from statistical reports by the central bank, which in January eased the restrictive measures surrounding these reserves and which will analyse this situation again this Wednesday, the volume of these mandatory deposits had previously reached historic highs.

At the end of December, these reserves stood at 291.457 million meticais (€4.078 million), a record amount, according to the central bank’s records.

The Bank of Mozambique set the mandatory reserves of commercial banks at the central bank at a ratio of 10.5% in national currency and 11% in foreign currency at the beginning of 2023. However, in the first six months of 2023, the central bank increased the ratio twice, in order to “absorb excess liquidity in the banking system, with the potential to generate inflationary pressure”.

The last of these increases took place in June 2023, reaching 39% of deposits in national currency and 39.5% in the case of foreign currency held in bank reserves.

Since the end of December, 2022, when they amounted to 62,144 million meticais (€894 million), the volume of bank reserves held by the central bank has increased by almost 400%.

Given the lack of foreign currency in the domestic market, Mozambican businesspeople have insisted in recent months on the need for the central bank to ease the mandatory reserve ratios in foreign currency.

This decision was only made on January 27 of this year, when the Monetary Policy Committee (CPMO) of the Bank of Mozambique decided to cut the mandatory reserve ratios in national currency to 29% and in foreign currency to 29.5%, “with the aim of providing more liquidity to support the economy in restoring its productive capacity and supplying goods and services”, according to the accompanying statement.

The governor of the Bank of Mozambique, Rogério Zandamela, stated on March 26 that, following the reduction of the ratios decided in January, liquidity in the financial system, particularly in foreign currency, was sufficient, and he did not expect to repeat the exercise.

“At this moment we are comfortable with the level of liquidity that exists in the system, there is no need to touch the structural liquidity by messing with the mandatory reserves. We will maintain them. It is not something to play around with,” the governor told journalists at the end of the last CPMO meeting.

At this March meeting, the CPMO cut the interest rate again, now to 11.75%, but kept the mandatory coefficients unchanged, with Rogério Zandamela justifying that the measure adopted at the previous meeting “freed up a lot of liquidity”.

“Just to give an idea of the order, all of this together, in meticais alone, we are talking about at least 55 billion meticais [€798.2 million], and almost US$250 million [€231.8 million] in terms of foreign currency, which was freed up for the normal functioning of the economy,” Zandamela pointed out at the time.

The next CPMO meeting is scheduled for this Wednesday (28-05).

Source: Lusa