Metical regains some ground against dollar

The exchange rate of Mozambican currency, the metical, showed signs of stabilizing in April, after three months of sharp depreciation against the US dollar, according to the spokesperson for the Bank of Mozambique, Waldemar de Sousa.Speaking on Wednesday at a Maputo press conference on the current economic situation, Sousa said that, in the first quarter of the year, the metical had lost 9.52 per cent of its value against the dollar. That is the figure from the inter-bank exchange market – ordinary citizens trying to buy dollars at a commercial bank, however, would have felt a much sharper devaluation. The average depreciation of the metical in the commercial banks in the first three months of the year was 13.78 per cent.However, in April the metical regained much of the ground lost in the first quarter. At the end of March, there were 34.6 meticais to the dollar on the inter-bank market, but today the figure is 33.47 meticais to the dollar. In the commercial banks, the average at the end of March was 38.8 meticais to the dollar, and Sousa said in some cases a dollar sold for 40 or 41 meticais. But now the rate in the banks has fallen to 36.42 meticais to the dollar. Sousa said that much of this phenomenon is explained by the strength of the dollar which has risen in value against virtually every other major currency. He added that the metical had come under pressure because of the demand for foreign currency to pay for imports in a situation where export revenue has been falling because of declining world market prices for key Mozambican exports.The exchange rate of the metical against the South African rand, the key currency for most Mozambican food imports, has been less troubled. There were 2.8 meticais to the rand in March, and in April the rate was not much different at 2.76. The central bank had intervened on the inter-bank markets to shore up the metical, and Sousa believed these interventions are having the desired effect. In the first four months of this year the Bank of Mozambique had sold 481 million dollars on the Inter-Bank Exchange Market.
NET INTERNATIONAL RESERVES - US$2.489 billion
An inevitable result of this is a decline in Mozambique’s Net International Reserves to US$2.489 billion, enough to cover four months imports of goods and non-factor services (excluding imports by the foreign investment mega-projects).The general decline in commodity prices has a positive side in that Mozambique’s fuel import bill has been cut substantially. Sousa said that between April 2014 and March 2015 the oil price had dropped by 47 per cent.On the other hand, the prices of key Mozambican exports have also tumbled. The price of coal is down by over 17 per cent, and of natural gas by over 13 per cent. Of Mozambique’s agricultural exports the worst price falls have been for sugar and cotton (both with annual price falls of over 28 per cent).The aluminium ingots produced at the Mozal smelter on the outskirts of Maputo remained the country’s largest export. In 2014, aluminium brought the country revenue of 1.052 billion dollars, slightly less than the 2013 figure of 1.063 billion. The value of coal exports fell from 502.9 to 490.2 million dollars. Despite the price fall, natural gas exports to South Africa from the Temane and Pende fields in Inhambane province rose from 229.6 to 339.9 million dollars. There was a leap in electricity exports from 270.1 to 355.3 million dollars – largely because, after the rehabilitation of its turbines, the Cahora Bassa dam on the Zambezi is now operating at near full capacity.Sousa said that the deficit on the current account fell from 42 per cent of GDP in 2013 to 36.3 per cent in 2014. Much of this improvement was due to a 6.2 per cent decline in imports.
FOREIGN DEBT - US$7.188 billion
As for Mozambique’s foreign debt, the latest figure from the central bank is that in 2014 the nominal stock of foreign public debt rose to US$7.188 billion, or about twice the value of the country’s exports that year. The bank put the debt stock at 45 per cent of GDP.This should set alarm bells ringing. For speaking at the Mozambican parliament, the Assembly of the Republic, last Friday, the Minister of Economy and Finance, Adriano Maleiane, put the debt sustainability ceiling at 40 per cent of GDP. He said the government would ensure that the debt stock was held to below this figure – yet according to the Bank of Mozambique this ceiling has already been breached.