The president of the Confederation of Economic Associations of Mozambique (CTA) told Lusa on Thursday that the sharp appreciation of the metical against the US dollar will only be useful if it has an effect on the economy.
“The most important thing is to see the effect [of the appreciation of the metical] on the economy,” Agostinho Vuma told Lusa news agency, lamenting the fact that the appreciation is the result of policies and not national production.
Since February the metical has risen 18.6 percent against the dollar, reversing the devaluation trend, making the national currency the most valued in the first months of this year worldwide.
Given these figures, the president of the CTA, Mozambique’s largest employers’ association, was sceptical about the advantages of the positive fluctuation of the national currency, doubting that it could have an effect on the economy.
“How are our interest rates today, that the metical has appreciated? How is the circulation of financial mass in the economy? How is the promotion of the credit portfolio for the productive sector”, Agostinho Vuma questioned.
Vuma noted that the gains of the metical against the US currency were not a result of the dynamics of the Mozambican economy, but of internal and external monetary policy factors, mainly the injection of liquidity into the world’s main economies to combat the covid-19 pandemic.
The appreciation of the Mozambican currency comes despite the downward revision of the economic growth forecast for this year by the International Monetary Fund, which lowered its estimate from 2.1 percent in October
“I would be happier if this appreciation of the metical came from production, if we produced a lot and exported a lot, but we are not producing,” he noted.
The rise in the Mozambican currency comes despite the International Monetary Fund’s downward revision of its economic growth forecast for this year, which lowered its estimate from 2.1 percent in October to 1.6 percent last week and the appreciation comes in the wake of measures taken by the central bank.
On 17 March, the Monetary Policy Committee (CPMO) of the Bank of Mozambique decided to keep the monetary policy interest rate (MIMO rate) at 13.25 percent, justifying the decision with the “prevalence of high risks and uncertainties, despite the downward revision of inflation prospects in the short and medium term.
A lower rise in prices is expected, mainly reflecting the tendency for the metical to appreciate due to measures taken at the last session of the CPMO, in a context of weak economic activity,” added the regulator, which in January raised the MIMO rate by 300 basis points to 13.25 percent.
According to the Bank of Mozambique, foreign exchange pressure has reduced substantially, with demand for foreign currency being “fully met,” as a result of “greater fluidity observed in the foreign exchange market, contrary to the trend recorded at the beginning of the year.
