Mozambique’s Net International Reserves Rise in December After Previous Declines

In December, Mozambique’s Net International Reserves rose to $3.740 billion after two months of decline. This increase signifies the highest level since September. Governor Rogério Zandamela affirmed the adequacy of foreign currency reserves while addressing concerns about liquidity due to mandatory reserve coefficients. Recent adjustments aim to support the economy’s restoration.

Mozambique’s Net International Reserves (NIR) rose in December to $3.740 billion (€3.453 billion), marking the highest level since September. This increase follows two consecutive months of decline, where reserves fell to €3.682 billion (€3.400 billion) in October and November. December’s figures reflected a 1.5% growth compared to the previous months.

As of September, the NIR totaled $3.762 billion (€3.474 billion), covering approximately three months of import necessities. These reserves are crucial for facilitating payments for goods and services abroad. By January 2024, reserves further increased to nearly €3.601 billion (€3.325 billion), the highest since September 2021, with July reaching a three-year peak of €3.807 billion (€3.515 billion).

Rogério Zandamela, the Governor of the Bank of Mozambique, stated on November 8 that the foreign currency reserves are adequate. He emphasized, “We won’t burn reserves and we’re not burning reserves,” highlighting the bank’s medium-term economic outlook. Zandamela reassured that the reserves are essential for the country’s smooth operation.

In recent months, businesses in Mozambique expressed concerns regarding the scarcity of foreign currency in the domestic market. They called for the central bank to reduce the mandatory reserve coefficients, which had risen to 39.5%, a significant increase from 11.5% in 2022. Following these calls, on January 27, the Monetary Policy Committee (CPMO) of the Bank of Mozambique announced a reduction of the mandatory reserve coefficients to 29.00% in national currency and 29.50% in foreign currency, aiming to enhance liquidity to support economic growth and ensure supply stability.

In summary, Mozambique’s Net International Reserves have rebounded in December after previous declines, reflecting strategic management by the Bank of Mozambique. The increase in reserves is vital for supporting import needs and facilitating foreign payments. The central bank is also adapting reserve requirements to bolster liquidity and stimulate economic recovery, ensuring the country’s financial stability amidst ongoing challenges.

Original Source: clubofmozambique.com