The shortage of foreign currency in the Mozambican market has been a growing concern, especially since mid-2023, when the Banco de Moçambique (BdM) ceased providing foreign exchange for fuel imports. This decision intensified the “competition” for foreign currency previously allocated to other essential imports, such as food and medicines, further complicating the scarcity situation. With commercial banks forced to “find their own way” to source the currency needed to settle fuel bills, the problem became more apparent.
However, the BdM, responsible for managing the foreign exchange market, argues that the market remains stable and liquid, with indicators such as export revenues and conversion levels pointing to a controlled situation. The question arises: Who is correct—the regulator or the businesses? And what role do commercial banks play in this scenario?
Recent Currency Statistics
Discussing the currency shortage without considering its primary sources—exports and imports—would be incomplete. Over the past 12 months, an analysis of Mozambique’s external trade statistics shows relative stability. Although average imports, at $755.79 million, exceeded exports, which stood at $699.69 million, this imbalance was offset by Foreign Direct Investment (FDI). Despite a drop in exports in early 2024, followed by a partial recovery, imports also decreased, reducing the need for foreign currency.
The near-fixed exchange rate against the US dollar suggests an absence of significant pressures in the foreign exchange market. The import coverage ratio, which reached 3.4 months in December 2023, returned to 3.1 months in recent months, indicating no extraordinary shifts in foreign currency availability. Furthermore, net international reserves rose from $3.0 billion in June 2023 to $3.6 billion in June 2024, and foreign currency deposits increased from $852 million to $876 million over the same period.
Thus, while the private sector reports difficulties in accessing foreign currency, the statistics indicate that exports have so far managed to cover import needs, albeit within a narrow and fragile margin.
Where Does the Real Currency Problem Lie?
The issue does not appear to stem from a significant change in the flow of foreign currency (availability), but rather from cautious management of this currency by commercial banks, which complicates client access. The BdM’s decision in June 2023 to stop covering fuel imports forced commercial banks to mobilize their own dollar resources, eliminating a previous comfort zone.
The availability of foreign currency among commercial banks has become more unequal, depending on each bank’s ability to attract large exporters or clients who bring in foreign currency. This inequality is exacerbated by a lack of “solidarity” among commercial banks, evidenced by the reduction in Interbank Foreign Exchange Market (MCI) operations, where transactions, in a country with a GDP of over $15 billion, range between $3 million and $5 million per month.
Cautious management of foreign currency in the current context is aggravated by the high Reserve Requirement Ratio on foreign currency, currently set at 39%. Combined with factors such as the slight economic slowdown in the country and the BdM’s deliberate earlier withdrawal from co-participating in foreign exchange for fuel imports, this increases the pressure exerted by commercial banks on the BdM regarding the “foreign exchange shortage.” This pressure is exerted indirectly through long wait times for currency access, resulting in continuous complaints from business owners. It is fair to say that while there may be foreign currency availability in Mozambique’s economy, the difficulty in accessing it creates the perception of a “foreign currency shortage or insufficiency in the market.”
The Impact of the Electoral Context on Currency Shortages
Investment flows into the country are directly linked to investor expectations regarding the electoral process. In such contexts, some investments tend to be postponed until the new government is established, reducing foreign currency inflows and increasing pressure on commercial banks. While 2023 saw a considerable influx of foreign investment, the same cannot be said for the current electoral period, where investors tend to delay decisions and avoid converting dollars into meticais.
Possible Solutions and Perspectives
The foreign currency shortage in Mozambique is a complex challenge that requires a multifaceted approach. Relevant statistics suggest that it is more a problem of access difficulty than outright unavailability. Collaboration and dialogue between the Banco de Moçambique, commercial banks, and the private sector will be crucial to developing sustainable solutions.
The BdM needs to distinguish between availability (having the currency in the system) and access (allowing businesses to use it flexibly). “We can’t have meal problems at home when there’s enough food in the pantry.”
In the coming months, if no action is taken by the regulator and commercial banks maintain their current stance, pressure on foreign currency access is expected to persist. However, the exchange rate—which, according to economic principles, responds to this pressure through depreciation—may remain stable and resilient at its 64 meticais per dollar rate. This is because the regulator may continue to use “rigor and discipline” with commercial banks as a complementary tool to manage currency stability, as it has done in recent years.
