The lack of foreign currency in Mozambique is prompting airlines to limit operations, according to the CTA. The situation is forcing airlines to increase local fares and reduce frequencies. A survey revealed significant unpaid foreign invoices, particularly in aviation, despite the country’s favorable export-import ratio. Recommendations to alleviate the issue include urging extractive companies to repatriate export earnings.
The Confederation of Economic Associations of Mozambique (CTA) has issued a warning regarding the lack of foreign currency in the market, which is forcing airlines to curtail their operations in the country. Muhammad Abdullah, head of the CTA’s Tourism department, emphasized the urgency for measures to remedy the situation, stating that when a business becomes unsustainable, management must take decisive actions.
Without sufficient access to foreign currency, airlines are offering fares in meticais at higher rates than in foreign currencies, leading to frequency reductions and decreased sales within Mozambique. Abdullah mentioned Ethiopian Airlines as a case in point, continuing operations but limiting local sales to foreign currency.
A recent CTA survey highlighted that over 66 companies reported needing foreign currency for unpaid invoices from abroad, with 41% of these firms in the industrial sector, 25% in aviation, and 21% involved in general trade. The total requests amount to US$373 million, with the aviation sector being notably impacted.
Evaristo Madime, CTA’s Industry department head, disclosed that many airlines have ceased flights to Mozambique and are selling tickets exclusively through foreign travel agencies due to these financial constraints. The survey also uncovers issues in importing essential goods, including medicines and vehicle replacement parts, due to unpaid foreign invoices since June.
The CTA assessed that Mozambique’s exports significantly outmatch imports, particularly in sectors like mining and gas, where the export-import coverage is approximately 87%. Despite this, revenue repatriation from major projects is lacking, exacerbating the currency shortage dilemma.
To alleviate foreign exchange shortages for importing raw materials by US$500 million, the CTA recommends that the government push extractive industry firms to repatriate their export earnings. This strategy could significantly enhance foreign currency flow and restore financial stability in the market.
The scarcity of foreign currency in Mozambique is jeopardizing airline operations, prompting the CTA to call for immediate government intervention. The aviation sector is notably affected, with many airlines either reducing operations or resorting to selling tickets through international channels. Addressing the repatriation of export revenues is crucial for improving the foreign currency situation and stabilizing the economy.
Original Source: clubofmozambique.com
