The Monetary Policy Committee (CPMO) of the Bank of Mozambique (BoM) has decided to keep the mandatory reserve ratios of commercial banks unchanged, at maximum values, at least until the end of September, despite appeals from businesspeople and the International Monetary Fund (IMF).
The decision taken at the central bank committee meeting held on Wednesday 31 July maintains the obligation for commercial banks to place 39% of their resources in national currency and 39.5% in foreign currency with the BdM as reserves.
“The next CPMO meeting is scheduled for 30 September, so until then these coefficients will remain unchanged for at least another two months,” added the information provided by Lusa.
The IMF recently recommended that the Bank of Mozambique reduce “the high reserve ratios” required of commercial banks in order to boost the national economy, advising the implementation of alternatives to absorb excess liquidity and the remuneration of mandatory reserves.
In the report on the fourth evaluation of the Extended Credit Facility (ECF) programme, finalised this month, the Fund stressed the need to adjust the high reserve requirements. “Reducing the high reserve requirements is crucial to easing financial conditions. Although the Mozambican financial system has a structural liquidity surplus, the significant increase in mandatory reserves in 2023, from around 10 per cent to 40 per cent, may have been excessive to absorb the excess liquidity,” the report highlights.
The IMF warned that the BoM should avoid using reserve requirements as an active policy instrument. “In the medium term, the Bank of Mozambique should also remunerate mandatory reserves at the key rate, while absorbing excess reserves through a fixed-rate total placement modality,” the organisation recommended. Otherwise, the high requirements for unremunerated reserves could increase the risks to financial stability and hinder monetary transmission.
The Confederation of Economic Associations of Mozambique (CTA), meanwhile, has asked the central bank to reduce reserve requirements, highlighting a deficit of 25.3 million meticais (400 million dollars) that is causing serious constraints in the business sector. This deficit has led to delays in payments abroad, fines, billing shortfalls and other operational problems.
According to figures presented by the CTA, unmet needs in imports or payments abroad have already reached 400 million dollars (25.3 million meticais) in 2024, as a result of the restrictions on foreign currency liquidity in banks. The main cause is the high ratio of mandatory reserves, set at 39 per cent for foreign currency, a decision taken by the BoM over a year ago.
Since December 2022, the volume of mandatory reserves has grown by 306 per cent, from 62.1 million meticais to 251.1 million meticais by the end of April this year. Mandatory reserve requirements were set by the BoM at 10.5% in national currency and 11% in foreign currency at the beginning of January 2023. However, over the first six months of the year, the BdM increased these ratios on two occasions, justifying the changes as necessary to absorb excessive liquidity and contain inflationary pressure.
