The Bank of Mozambique (BdM) announced this Monday (25) an increase in the required reserve ratio applicable to liabilities in local currency from 29% to 39%, in a decision aimed at withdrawing excess liquidity from the banking system and reducing the risk of rising inflation.
The announcement was made by central bank governor Rogério Zandamela at the end of the Monetary Policy Committee (CPMO) meeting.
The measure represents a shift from the policy adopted earlier in the year, when the central bank had reduced reserve requirement ratios as part of an ongoing monetary easing cycle. With this decision, the regulator is once again strengthening liquidity control tools in a more challenging environment for price stability.
Explaining the decision, the governor said the objective is to limit the circulation of excess liquidity that could fuel inflationary pressures.
“The Monetary Policy Committee decided to increase the reserve requirement ratio for liabilities in local currency from 29.0% to 39.0%, aiming to absorb excess liquidity in the banking system that could generate higher inflationary pressure,” reads the statement presented by the governor.
At the same time, the Bank of Mozambique decided to keep the reserve requirement ratio for foreign currency liabilities unchanged at 29.5%, signaling a differentiated approach between the two segments of the monetary market.
In practice, the decision forces commercial banks to keep a larger portion of deposits in meticals immobilized at the central bank, reducing the funds available for immediate circulation in the financial system.
The tightening of reserve requirements comes at a time when the Bank of Mozambique has revised inflation expectations upward. In April 2026, annual inflation accelerated to 4.4%, up from 3.4% in March, in a context marked by rising fuel costs, supply uncertainties, and pressure from international prices.
According to the CPMO, risks linked to the conflict in the Middle East remain elevated, with potential impacts on global logistics chains, energy prices, and food costs — all of which may continue to put pressure on domestic inflation.
Despite the tightening of reserve requirements, the central bank opted to keep the monetary policy interest rate (MIMO rate) unchanged at 9.25%, prioritizing a more targeted intervention on banking system liquidity.
The Bank of Mozambique stated that monetary policy decisions will continue to depend on the evolution of risks and inflation prospects in the coming months.
How do reserve requirements work?
In practice, increasing reserve requirements means commercial banks must keep a larger share of deposits immobilized at the Bank of Mozambique, reducing the amount of money available for lending and other market operations. With this measure, the central bank seeks to withdraw excess liquidity from the financial system to limit price pressures and help control inflation, without directly raising interest rates.
Text: Felisberto Ruco
