Maputo, 01 Oct (AIM) – Mozambique’s foreign exchange market has recorded a high volume of currency trading between January and August of this year, with commercial banks purchasing 5.73 billion US dollars.
On the other hand, the commercial banks sold 5.65 billion dollars to their clients, according to data released on Wednesday by the Monetary Policy Committee of the Bank of Mozambique (CPMO).
Speaking to reporters, Felisberto Navalha, governor of Bank of Mozambique, explained that the dynamism of the foreign exchange market has been driven primarily by the execution of liquefied natural gas projects in the Rovuma Basin and the performance of the extractive industry, against a backdrop of relative exchange rate stability.
“The behavior of the foreign exchange market reflects economic activity linked to major projects and the extractive industry, sectors that continue to generate considerable demand for foreign currency transactions. Despite the high level of activity in the foreign exchange market, the functioning of the financial market remains constrained by persistent delays in the servicing of domestic and external public debt”, he said.
According to Navalha, these delays, including payments due to domestic financial institutions and multilateral creditors, have contributed to reduced appetite for securities, interest rate rigidity in the Interbank Money Market, and a heightened perception of risk.
“Domestic public debt, excluding loan and lease agreements and obligations related to losses caused by unjustified delays, stood at 546.5 billion meticais. This increase also constitutes a source of pressure on the banking system’s liquidity”, he explained.
He also explained that the risks and uncertainties regarding the economic outlook and inflation trends remain high. On the domestic front, the main uncertainties relate to the effects of imported inflation, the trajectory of public debt, and the impact of climate shocks.
Externally, the CPMO is monitoring the impact of geopolitical tensions in the Middle East and Europe on trade flows, the global supply of goods, and international fuel and food prices.
“Against this backdrop, the CPMO reaffirms its commitment to ensuring price stability, while also deeming the adoption of fiscal consolidation measures and structural reforms necessary. These reforms are expected to help boost market confidence, improve the business environment, mobilize external financial resources, increase production, and foster job creation”, he said.
(AIM)
MR/PC/Am/
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