Introduction researches we can observe many changes and progress


Mozambique is a
country situated in the south of Africa and according to previous data and
researches we can observe many changes and progress in our local economic

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Our currency suffered
with a lot of instability for a long time and a lot of effort has been done for
the progress and development of the country consequently. Our first Central
bank, called Banco de Mozambique (BM), was founded in 17 May 1975 in with the
signing of “Acordos de Lusaka”  by the
Portuguese Government.

Two years ago, they
decided to reduce the taxes, and it created a stability between the local
currency, the Mozambique metical (MZN) and the USD. And we have been facing
pressure due to risks of inflation, and it has been growing due to high levels
of debt.

Last year was a year
of good results and the MZN appreciated and created an equilibrium between the
exchange rate. Banco de Mozambique’s foreign reserve holdings continued
to strengthen. As of October 20, the Gross Domestic Reserves of the country
increased to $2,514 million, enough to cover 6.1 months of imports of goods and
services, excluding large projects, in a context in which the BM’s sales were $365
million, intended to be shared in the import bill for liquid fuels.










The Mozambican Metical

Our Monetary policy
suffered fluctuations and it was a predicament for stabilization of our economy.

Commodity prices were expected to have a gradual recovery by June 2017
and prices for some of Mozambique’s main exports were expected to increase,
with aluminium and gas prices projected to rise by 3.2 % and 6.8 %

 Taking a general view, we can observe that the
Mozambican metical remained stable against the Euro and the US dollar, as it
has broadly since the end of August 2016.

The Mozambican
currency depreciated against the Euro in the last week of August 2016, but
since then the average weekly changes have been less than metical 10 cents of.

The Mozambican
currency has been appreciating since September 2016, when the Euro costed 88

Since then, the
Mozambican currency’s best rate was in May 2017, when the Euro was worth 65.91

In relation to the US
dollar, the Mozambican currency was practically unchanged in the last months of
last year, with purchase averages at 60.72 and sale at 61.88 meticais.

Meticais average
exchange rates against the Euro through the years:

Source: Converter-x (




Monetary Policy

The central bank continued tightening its monetary stance since the last
quarter of 2015, as foreign-exchange and inflationary pressures accelerated.

The Banco de Mozambique stepped-up its monetary tightening regime with
eight consecutive rate increases since October 2015. The monetary policy stance
sought to slow the metical’s depreciation and cascade a positive effect on
inflation, whilst limiting the draw on central bank reserves. It led to a shift
away from the interventions in foreign exchange markets seen in late 2015 to a
focus on maintaining positive real interest rates and reducing excess
liquidity. This has required regular and steep increases in policy rates to
keep up with inflation and decreasing confidence in the metical. Policy rate
hikes have been accompanied by series of other measures, including higher bank
reserve requirements.

The country faced two factors that contributed to a currency depreciation,
low demand level and liquidity constraints. And even with the situation, the
Mozambican metical remained relatively stable comparing to previous years.

Financial vulnerabilities in Mozambique’s banking sector

Over the years the central bank has had its ups and downs with the country’s
commercial banks. In October 2016 The Central Bank was forced to intervene on Mozambique’s
fourth largest bank, Monza Banco, Nosso Banco, highlights how quickly
vulnerabilities in the financial sector can emerge. A combination of slower
growth, currency depreciation, and tighter monetary policy have heightened the
exposure of Mozambique’s banks to risks. Increased interest rates are raising
the cost of financing, leaving borrowers and loan holders more exposed. All of
which occurred as the economic decline and falling demand took their toll on
Mozambican businesses. Moreover, currency depreciation has increased
debt-servicing costs for foreign loans.  Balance sheet disparities are also on the rise
as foreign currency denominated deposits have grown while lending has remained
limited due to regulatory restrictions. The central bank decided to limit
access to its overnight window to two days a week in a hope to entice banks to
improve liquidity management.



Mozambique predicted to expand the GDP over 55 % in 2018 with
megaprojects expected to kick-off and increase import levels. There are other
megaprojects as coal production in Moatize a Sasol’s investment in Inhambane
province has been showing very good results and is expected to keep expanding.











Source: Banco De
Mocambique website (, data for 18 January 2018



The central bank aims to maintain a strong currency along with steady
growth through 2018. They hope to curb inflation and increase employment opportunities
with some precautionary expansion of circulating money supply. Of course, the banking
sector remains volatile until now. In my opinion, the bank has so far failed in
meeting its primary objectives. This can be seen by the unstable currency
trends through the year, the increasing inflation rate which is currently at
18%. Above all a slew of corrupt politics cripples the country creating an unfavourable
environment. It is a long way from its goals.