The Bank of Mozambique (BoM) said that reserves held by Mozambican banks grew again in July, reaching an all-time high of 258.2 billion meticals (4 billion dollars), compared to June, when they stood at 257.7 billion meticals (3.9 billion dollars).
According to a report published by Lusa, these figures are contained in a statistical report from the central bank and reflect the second consecutive monthly increase, keeping the coefficient of obligatory reserves at high levels.
According to the document, the mandatory reserves of commercial banks were set at 10.5 per cent in national currency and 11 per cent in foreign currency at the beginning of January 2023.
However, in the first six months of last year, the Bank of Mozambique increased this coefficient twice, arguing that it was necessary to ‘absorb excessive liquidity in the banking system, with the potential to generate inflationary pressure’.
‘The last of these increases took place in June, with 39 per cent of deposits in national currency and 39.5 per cent in the case of foreign currency remaining in bank reserves,’ said the institution.
Following this increase, the Confederation of Economic Associations of Mozambique (CTA) considered that the decision made it even more expensive to take out bank finance, an essential mechanism in an economy of small and medium-sized enterprises.
On 1 August, the central bank decided to keep the compulsory reserve coefficients for commercial banks unchanged at their maximum values, at least until the end of September, despite appeals from businesspeople and the International Monetary Fund (IMF).
This decision was taken at a meeting of the Monetary Policy Committee (MPC), which will meet again on 30 September.
Recently, the IMF advocated reducing reserve ratios to boost the economy, advising alternatives to absorb excess liquidity and remuneration for reserves.
‘Reducing high reserve requirements is essential to ease financial conditions. Although the Mozambican financial system has a structural liquidity surplus, the significant increases in reserve requirements in 2023 (from around 10% to 40%) may have been greater than necessary to absorb excess liquidity,’ reads the IMF report on the fourth evaluation of the Extended Credit Facility programme, concluded in July.
