Mozambique: Net international reserves grew 1.5% in November to $3.07B

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Mozambique: Net international reserves grew 1.5% in November to $3.07B

9:42 CAT | 29 Dec 2023

File photo: Lusa

Mozambique’s net international reserves (NIR), which are needed for imports of goods and services, grew by 1.5% in November, to almost US$3.070 billion (€2.763 billion), due to the provisioning of banks, according to official figures.

According to a statistical report from the Bank of Mozambique, to which Lusa had access on Thursday, these reserves – in foreign currency – totalled US$3.024.8 billion (€2.722.7 billion) at the beginning of November and the growth was driven by the “provisioning of banks”, which are obliged to set aside reserves, which grew by US$165.3 million (€148.8 million) in the space of a month.

In addition, these figures – which total an absolute increase of US$44.9 million (€40.7 million) in reserves compared to the end of October – include a further US$15.7 million (€14.1 million) for projects in the country and US$18.5 million (€16.6 million) in miscellaneous purchases of foreign currency.

Among the US$234.5 million (€211 million) in outflows from reserves in November, US$151.8 million (€136.6 million) came from transfers made by banks and US$21.7 million (€19.5 million) related to servicing Mozambican debt, among others.

Mozambique closed the month of November with enough reserves to cover 3.1 months of expected import needs for this year, which rises to 3.8 months “excluding major projects”, according to the Bank of Mozambique.

Last January, the Bank of Mozambique increased the ratio of mandatory reserves to foreign demand deposits from 11.5% to 28%, and in April it reduced the supply to fuel importers from 100% to 60%.

In the 2023 state budget, the Mozambican government set the goal of building up net international reserves of US$2.936.6 billion (€2.686 billion), “corresponding to three months’ coverage of imports of goods and non-factorial services”.

Mozambique’s international reserves have been falling since 2021, the International Monetary Fund (IMF) announced in July.

“Gross international reserves cover almost 4.3 months of imports [end of 2022], which is above the commonly recommended minimum buffer,” of “at least three months,” says an IMF report on the final approval of the review of the extended credit facility (ECF) for Mozambique.

The report adds that Mozambique’s international reserves have been “falling since the beginning of 2021” and reached US$2.9 billion (€2.580 billion) at the end of last year.

The IMF recognises the impact of the “high costs” of fuel imports on Mozambique’s international reserves, given the supply of foreign currency to the main fuel importers.

“At the same time, imports not related to megaprojects have increased significantly in the last two years, further reducing the import coverage of reserves,” the document notes.

Source: Lusa