Mozambique’s central bank will use US$60 million from its international reserves, which stand at US$4 billion, to inject foreign currency liquidity into the economy, the monetary regulator confirmed on Monday. According to the financial information agency Bloomberg, the initiative to inject US$60 million into the economy over the next two weeks, follows a 3.8% depreciation of the metical, with 57.6 meticais now needed to buy a dollar. The depreciation of the Mozambican currency comes after a significant appreciation in recent weeks, during which time it became the currency to rise most against the dollar worldwide.
“A month ago, the metical was the best performing currency, with an internal market flooded with US dollars, but now importers are struggling to gain access to foreign currency,” wrote Bloomberg.
According to the chief economist of Standard Bank Mozambique, Fáusio Mussa, “exporters reduced conversions into foreign currency following the strong appreciation of the metical, predicting that the improvement would not be sustainable”. In turn, “importers, who delayed payments to benefit from the strengthening of the local currency, returned to the market, also anticipating a reversal”, the economist explained, concluding that “the combination” of the “two factors caused a shortage of US dollars in the market , and the consequent currency correction”. The shortage of US dollars means that the metical is likely to continue to depreciate, despite sales by the Bank of Mozambique intended to control the decline, Mussa argued. The Standard Bank economic studies department predicts that the metical will reach the end of the year at 65.4 per US dollar, which implies an additional depreciation of 13.6%.
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