During an economic briefing organised by the Confederation of Economic Associations of Mozambique (CTA) last Wednesday, Oldemiro Belchior refuted the idea of a ‘shortage’ of foreign currency, a term often used by the private sector. According to the economist, the more appropriate word would be ‘insufficiency’.
However, it is important to emphasise that in the Portuguese language dictionary, the terms ‘scarcity’ and ‘insufficiency’ are considered synonyms.
‘There is no such thing as a shortage of foreign currency, but rather an insufficiency. It’s good not to confuse the two. Scarcity is lack.
The market isn’t dry of liquidity, that’s not true. It’s not possible for an economy to function normally without foreign currency. But there is a shortage of foreign currency, in other words, the stock of foreign currency available on the market is not sufficient to meet the need to import goods and services,’ explained Oldemiro Belchior.
The economist also mentioned that the availability of foreign currency varies from bank to bank, as conditions are not uniform throughout the system. Oldemiro Belchior added that ‘some banks face more difficulties in raising foreign currency due to a smaller portfolio of exporters, which limits their ability to respond to import needs,’ he pointed out.
Despite the difference in terminology, the reality is that many economic agents who seek euros, dollars, rands, among other currencies, from commercial banks to make imports encounter difficulties. Businesspeople have criticised the Bank of Mozambique, accusing it of reducing liquidity by increasing mandatory reserves in foreign currency as part of monetary policy. However, the central bank has claimed that there is an excess of liquidity in the system.
‘When the Bank of Mozambique says that the system has foreign currency, we think it’s within its rights to defend itself, because we in the private sector can say (in a practical way) that the system doesn’t have foreign currency.
For example, you have an invoice for 50,000 dollars to pay for some import, but you simply can’t. Imagine if it was a million dollars. Imagine if it was a million dollars. At no point does the bank say that it hasn’t received foreign currency yet, or that it will in a week and so it can wait. It says categorically that it has no foreign currency,’ said Aldemiro Eduardo, a businessman in the construction sector.
Entrepreneurs also realise that, although it is difficult to find 50,000 dollars on the formal market, these amounts are available on the informal market. This disparity causes confusion among entrepreneurs.
“There isn’t a shortage of foreign currency, there’s a shortage.It’s good not to confuse the two.Shortage is lack.The market isn’t dry of liquidity, that’s not true.It’s not possible for an economy to function normally without foreign currency”
The shortage of foreign currency not only affects importers, but also the tourism sector. At the same briefing, Muhammad Abdullah, executive director of Cotur (travel agency), said that at least three airlines had decided not to start flights to Mozambique in the first half of the year, including Air France and Cathay Pacific (from Hong Kong), due to the difficulties in repatriating foreign currency.
‘Currently, if we want to travel with Air France, we can’t buy tickets in Mozambique, only in a neighbouring country like South Africa. This situation is worrying, especially considering the measures the government has implemented, such as visa exemptions and facilitating investments [under the Economic Acceleration Measures Package],’ he commented.
In addition to Air France and Cathay Pacific, Abdullah mentioned that Ethiopian Airlines and Qatar Airways are also facing serious difficulties in repatriating foreign currency from ticket sales and are threatening to cancel their flights to Mozambique. ‘The foreign exchange situation is critical. Something needs to be done before we reach an unsustainable point, especially in the travel sector,’ warned the businessman.
According to the information, according to the CTA, the shortage or insufficiency of foreign currency in the system may be related to the fact that the Bank of Mozambique stopped sharing the fuel import bill from mid-2023.
It is important to mention that the lack of foreign currency is felt not only by the private sector, but also by the International Monetary Fund, the source emphasised.
