Mozambique’s Banks See Record Mandatory Reserves of €4.4 Billion in 2024

Mozambican banks’ mandatory reserves reached a record €4.441 billion in December 2024, reflecting a 15% increase over the past year. The Bank of Mozambique has adjusted reserve coefficients to manage liquidity and inflation. Business concerns about foreign currency availability led to a reduction in mandatory foreign currency reserve coefficients, aimed at bolstering economic support.

In December 2024, the mandatory reserves held by Mozambican banks reached a record €4.441 billion (307.8 billion meticais), marking a 15% increase from the previous year. The statistics provided by the Bank of Mozambique indicate a continuous rise in these reserves, which have witnessed consistent monthly record-breaking figures over the past eighteen months. Notably, between November and December 2024, the reserves surged by over 9%, reflecting the banks’ increasing deposits.

The Bank of Mozambique set the mandatory reserve coefficients at 10.5% for national currency and 11% for foreign currency in early January 2023. To counter excessive liquidity that could lead to inflation, the central bank raised these coefficients twice within the first half of 2023, with the most recent adjustment in June 2023 resulting in reserves of 39% and 39.5% for national and foreign currencies, respectively.

Since the end of December 2022, when reserves totaled €896 million (62.144 billion meticais), the amount held by the central bank has surged by nearly 400%. Business leaders in Mozambique have expressed concerns over the shortage of foreign currency in the domestic market, urging the central bank to relax the foreign currency reserve requirements. In response, on January 27, the Bank of Mozambique’s Monetary Policy Committee decided to reduce the mandatory reserve coefficients to 29% for national currency and 29.5% for foreign currency, aiming to enhance liquidity to support the economy.

The increase in mandatory reserves among Mozambican banks highlights significant developments within the banking sector, with an unprecedented rise that underscores the central bank’s regulatory measures. The adjustments in reserve coefficients reflect a balancing act aimed at managing liquidity and controlling inflation, addressing the economic needs while responding to calls from businesses for more accessible foreign currency. Overall, these insights signify the ongoing efforts made by the Bank of Mozambique to stabilize and stimulate the economy.

Original Source: clubofmozambique.com