Reserve requirements: Commercial banks will transfer more than $1B to the Bank of Mozambique – AMB | Carta

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Reserve requirements: Commercial banks will transfer more than $1B to the Bank of Mozambique – AMB | Carta

9:16 CAT | 06 Jun 2023

File photo: Banco de Moçambique / Facebook

The latest increase in the reserve requirement ratios – which rose to 39% for local currency and to 39.5% for foreign currency – will result in “a transfer of funds from commercial banks to the Bank of Mozambique [central bank] equivalent to US$1.03 billion (47 billion meticais plus US$254 million), which corresponds to 5% of the GDP [gross domestic product]”. This is according to the Mozambican Association of Banks (AMB), to whose accounts ‘Carta’ has had exclusive access.

This is single transfer of deposits, the 47 billion meticais relating to deposits in Meticais and the US$254 million relating to deposits in US dollars. On a monthly basis, the level of required reserve deposits can be adjusted in accordance with the evolution of the deposit portfolio of commercial banks.

In cumulative terms, the January and May increases in the reserve requirement coefficients remove from domestic banks the equivalent of US$2.62 billion, or 12.7% of the GDP, constraining the sector’s ability to grant credit. It should be recalled that the decision on reserve requirement ratios taken in January had had an impact equivalent to US$1.59 billion, that is, 7.7% of the GDP.

The AMB understands that this additional tightening of monetary policy aims to ensure that medium-term inflation remains in single digits.

Source: Carta de Moçambique