Mozambique: Metical to fall to 74 per US dollar by year-end, says Fitch

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Mozambique: Metical to fall to 74 per US dollar by year-end, says Fitch

7:38 CAT | 03 May 2021

File photo: Lusa

Consultant Fitch Solutions said on Thursday (29-04) that it expected the Mozambican currency to depreciate to 74 meticais per US dollar by the end of the year, after a significant appreciation in recent weeks.

“We anticipate that the metical will depreciate from 55 per US dollar to 74 per US dollar by the end of this year, following a strong appreciation recorded in March and April,” a comment on the evolution of the Mozambican currency reads.

Analysts at the consultancy, owned by the financial rating agency of the same name, argue that “the risks of inflation will decrease during the rest of 2021, reducing the need for further central bank interventions, thus allowing the metical to resume its trend of gradual depreciation”.

The metical has appreciated significantly, from 75 meticais per US dollar on 1 January, to its highest value of the last five years, on April 15, when it only took 55.1 meticais to buy a dollar, “becoming the second currency that has most appreciated so far since the beginning of the year worldwide”, the consultancy writes.

The Mozambican currency has depreciated slightly in the past week, and is now trading at 57 meticais per US dollar, compared to 55 US dollars on Monday.

The Fitch analysts believe that the currency is overvalued, and that its current value “does not reflect favourable macroeconomic conditions”, noting that the twin budgetary and external deficits increased in 2020 as a result of the coronavirus pandemic, and that attacks in the north of the country have harmed the country’s attractiveness as an investment destination.

The appreciation of the metical follows a fall in value of about 10% against the dollar in the past year, and appears counter to the forecasts of most analysts, who foresaw an even greater fall of the metical this year. It comes despite the wave of violence in the north of the country, which has catapulted Mozambique to the top of the international media agenda in recent weeks.

Source: Lusa