Mozambique: Government approves package to stimulate food production, control metical

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Mozambique: Government approves package to stimulate food production, control metical

10:18 CAT | 02 Dec 2015

A Bola (file)

The Mozambican government has approved a package of incentives for the production of food and exchange rate control actions to counter the metical’s sharp devaluation and a possible shortage of foreign exchange.

“The package includes measures to encourage domestic food production, foreign exchange practices to prevent speculation and a greater aggressiveness in the pursuit of foreign exchange abroad,” Mouzinho Saide said on behalf of the Cabinet at the end of session held in Maputo today.

According to Saide, the government plans to release currency “exceptionally” to import basic commodities such as wheat, and to intervene in the foreign exchange market to ensure greater availability of foreign currency.

Public companies will also be encouraged to contribute to the “de-dollarization” of the economy.

According to the Council of Ministers spokesman, the measures are immediate, both short and long term, and stress the need to increase local productivity.

“There will be incentives to ensure the recovery of the domestic industry in order to meet local demand,” he said. The measures also provide for the reactivation of agricultural companies in order to “ensure more availability of services and goods in the country”.

The package announced yesterday by the Council of Ministers follows a set of interventions announced on Monday by the Bank of Mozambique limiting the use of debit and credit cards abroad to prevent currency flight.

“We will establish limits on the use of credit and debit cards abroad,” Governor of the Bank of Mozambique Ernesto Gove said at a press conference, adding that banks would be instructed to update their computer platform to facilitate compliance.

Gove said the “exceptional situation” that the Mozambican economy is facing requires a change of consumption habits and import patterns.

“We cannot carry on as if nothing has happened. It requires a change in attitude by us all, particularly the economic drivers, or we will always have a balance of payments deficit,” the central bank governor warned.

Gove said that Mozambique would have to generate foreign exchange through exports in order to ensure the production cycle in raw materials and equipment and the availability of essential consumer goods.

Despite the threats facing the country, “its macroeconomic fundamentals are not shaken,” he said, noting that in addition to decisions taken in mid-November to review the interest rates, the central bank is also implementing fiscal measures, reinforcing other measures at the monetary level and maintaining supervision so as to ensure that inflation remains low and economically viable.

Source: Lusa