Mozambique’s International Reserves Increase in December After Previous Declines

Mozambique’s Net International Reserves grew to $3.740 billion in December, recovering after two months of decreases. Governor Rogério Zandamela confirmed that maintaining these reserves is key, stating they should not be “burned”. In response to currency shortages, the central bank has reduced mandatory reserve ratios to improve liquidity and boost economic activity.

In December, Mozambique’s Net International Reserves (NIR) increased to $3.740 billion (€3.453 billion), marking a recovery after two consecutive months of decline. The latest figures from the Bank of Mozambique show that foreign currency reserves decreased to €3.682 billion (€3.400 billion) in October and November, before rebounding by 1.5% in December. This new total is the highest since September 2021 and is equivalent to approximately three months’ worth of import needs.

Historically, Mozambique’s NIR has fluctuated, reaching almost €3.601 billion (€3.325 billion) in January 2024 which represented a significant milestone. It previously peaked at €3.807 billion (€3.515 billion) in July, indicating a period of robust reserve growth. The governor of the Bank of Mozambique, Rogério Zandamela, emphasized the importance of maintaining these reserves and stated, “We won’t burn reserves and we’re not burning reserves.” His comments were made in reference to the institution’s economic outlook.

As foreign currency scarcity has intensified within the local market, businesses have urged the central bank to reconsider its mandatory reserve ratios, currently at 39.5%, a significant increase from 11.5% in 2022. In response to these concerns, the Monetary Policy Committee (CPMO) of the Bank of Mozambique opted to lower the reserve requirements effective January 27 to 29.00% for national currency and 29.50% for foreign currency. This adjustment aims to enhance liquidity, thereby supporting the economy’s productive capacity and ensuring an adequate supply of goods and services.

In conclusion, Mozambique has seen a positive shift in its Net International Reserves, after experiencing declines in previous months. The NIR reached $3.740 billion in December, highlighting the central bank’s commitment to maintaining reserve levels. The reduction in mandatory reserve coefficients reflects the authorities’ efforts to combat liquidity issues in the economy, ensuring the continuity of trade and service provision in the country.

Original Source: clubofmozambique.com