Mozambique’s Mandatory Reserves Reach Record High of €4.4 Billion in 2024

Mozambique’s banks’ mandatory reserves hit a record €4.441 billion in December 2024, an increase of 15% from the previous year. The Bank of Mozambique increased reserve coefficients to manage liquidity and curb inflation. In response to foreign currency shortages, the reserve requirements were adjusted in January 2024 to support economic recovery by enhancing liquidity.

In December 2024, Mozambique’s banks reported their mandatory reserves reached a record high of 307.8 billion meticais, equivalent to approximately €4.441 billion, marking a 15% increase year-on-year. This notable growth reflects the continuous rise of compulsory deposits set by the Bank of Mozambique, breaking monthly records over the past 18 months.

As of September 2023, mandatory reserves stood at 237.092 billion meticais (€3.420 billion), and between November and December 2024, there was an increase of more than 9%. The central bank instituted these reserves with coefficients of 10.5% for national currency and 11% for foreign currency, effective January 2023. However, due to rising liquidity concerns, these coefficients were adjusted twice within the first half of 2023, eventually reaching 39% for national currency and 39.5% for foreign currency.

Since the end of 2022, mandatory reserves have surged by nearly 400%, rising from 62.144 billion meticais (€896 million). To address the foreign currency scarcity in the domestic market, local business owners have urged for a reduction of foreign currency reserve requirements. The Bank of Mozambique’s Monetary Policy Committee responded on January 27 by lowering the coefficients to 29% for national and 29.5% for foreign currency reserves, hoping to enhance liquidity to revitalize the economy and improve the supply of goods and services.

In conclusion, Mozambique’s banking sector has reached unprecedented levels of mandatory reserves, highlighting a significant shift in the handling of liquidity by the Bank of Mozambique. The adjustments in reserve coefficients demonstrate the central bank’s efforts to manage inflation while responding to the urgent liquidity needs of the economy. Moving forward, these measures aim to bolster economic recovery by enhancing the flow of goods and services in the market.

Original Source: clubofmozambique.com