Mozambican banks’ mandatory reserves reached a record €4.441 billion in December 2023, increasing by 15% over one year. The Bank of Mozambique had imposed higher reserve ratios to manage liquidity and inflation, but recently reduced these requirements to support economic recovery amidst a foreign currency shortage.
In December 2023, Mozambique’s mandatory reserves reached a record €4.441 billion (307.8 billion meticais), reflecting a 15% increase within one year, per the Bank of Mozambique’s statistics. Over the past 18 months, these reserves have consistently broken monthly records, with a notable increase from €3.420 billion in September to €4.441 billion by the end of 2023—up more than 9% in just two months.
The mandatory reserves are dictated by the Bank of Mozambique, which set a reserve ratio of 10.5% for meticais and 11% for foreign currency starting January 2023. To combat excess liquidity that could inflate the economy, the bank adjusted these coefficients twice in the initial half of 2023, culminating in rates of 39% for local currency and 39.5% for foreign currency.
Since December 2022, when reserves stood at €896 million, there has been a dramatic increase of nearly 400% in reserves held with the central bank. In light of a foreign currency shortage in the market, business leaders urged the central bank to soften its foreign currency reserve requirements. On January 27, 2024, the Monetary Policy Committee of the Bank of Mozambique responded by reducing the coefficients to 29% for national currency and 29.5% for foreign currency, aiming to enhance liquidity and boost economic activity.
The Bank of Mozambique has increased mandatory reserves to a record level, reflecting a significant rise in the banking sector over the past year. Despite initial measures to absorb liquidity and prevent inflation, the bank ultimately decided to reduce reserve requirements to facilitate economic recovery, addressing the needs voiced by local businesses and aiming to spur liquidity in the market.
Original Source: clubofmozambique.com
