GOVERNMENT PROMISES MEASURES TO MITIGATE DEPRECIATION

The Mozambican government announced on Tuesday that it is planning a package of measures to boost national production and to mitigate the effects of the recent depreciation of the country’s currency, the metical.Speaking to reporters after the weekly meeting of the Council of Ministers (Cabinet), the official government spokesperson, Deputy Health Minister Mouzinho Saide, said the measures will include good foreign exchange practices, to avoid speculation, and a ”more aggressive” search abroad to bring foreign currency into the economy. Doubtless that is required to support the government’s pledge to increase intervention in the exchange market in order to ensure greater availability of foreign currency. Saide added that, as an exceptional measure, foreign currency will be made available to import basic goods.The intention, he said, is that goods and services must be available during the approaching festive season, so that Mozambican can celebrate Xmas and the New Year calmly and peacefully. Saide guaranteed that monitoring mechanisms will be in place “to ensure price stability”. “There will be stimulus actions to guarantee the re-establishment of national industry, so that there will be more industrial production, to meet the needs of the local market for foodstuffs”, said Saide. “Agricultural companies will be reactivated in order to produce more food”.But Saide gave no details of any of these measures. They follow the press conference given on Monday by the governor of the Bank of Mozambique, Ernesto Gove, at which he urged that the country should cut its import bill by importing only goods that are strictly necessary. He also announced that the central bank will restrict the use of Mozambican credit and debit cards outside the country. The amount of capital drained from the economy by the use of bank cards abroad is now running at 800 million US dollars a year.As the holiday season approaches, prices are taking off ominously. In the Maputo markets a 25 kilo sack of rice which until recently sold for 600 meticais (11.3 dollars at current exchange rates) now costs over 800 meticais. The price of a ten kilo sack of potatoes has risen from 180 to 250 meticais, and a kilo of tomatoes from 35-40 to 60-65 meticais.Information from the Agricultural Markets Information System shows that across the northern and central provinces producers are hiking the prices of all kinds of beans – sometimes by as much as 60 per cent. The price of maize, however, is remaining fairly stable.One bright spot is that the metical appears to be staging a slight recovery. The average exchange rate on the Interbank money market fell from 54.74 meticais to the dollar on Monday to 53.82 on Wednesday. Surprisingly, the largest commercial bank, the Millennium-BIM, is quoting a lower rate of 52.5 meticais to the dollar.This is still a long way from the 45 meticais to the dollar which last month the International Monetary Fund (IMF) said would be an acceptable exchange rate, let alone the rate of 32 to the dollar at which the metical was trading at the start of the year.