Businesses in Mozambique plan to submit overdue invoices to the central bank to demonstrate a shortage of foreign currency. The Confederation of Economic Associations highlights declining liquidity in currency swaps and an increase in foreign currency purchases by banks from customers. This situation poses significant challenges for overall financial stability in the country.
The private sector in Mozambique plans to present overdue invoices to the Bank of Mozambique to highlight a foreign currency shortage. This initiative was revealed by Agostinho Vuma, the chairman of the Confederation of Economic Associations of Mozambique (CTA), during a press conference that criticized the central bank’s response to the challenges faced by businesses.
Vuma noted that liquidity swaps in the Interbank Foreign Exchange Market have declined significantly compared to previous years, despite a slight recovery seen in the fourth quarter of 2024. During the second quarter of 2024, these operations fell to about $5.5 million, marking a historic low amid ongoing liquidity constraints.
The overall trading activity between banks and customers saw a 13% increase from the first to the third quarter of 2024, largely driven by an 18% rise in foreign currency purchases from customers, while sales to customers grew by 7%. However, banks’ net foreign assets decreased by 47.5% over two years, signaling financial instability.
Vuma explained that banks are compelled to increase net foreign currency purchases from clients due to rising external obligations and a diminishing supply of foreign currency. He warned that interpreting these net purchases merely as a healthy exchange position can be misleading without considering the associated financial obligations.
The current economic climate in Mozambique is characterized by a critical shortage of foreign currency impacting private sector operations. The CTA aims to provide concrete evidence to the Bank of Mozambique regarding this liquidity crisis by submitting overdue invoices. The deterioration in currency liquidity since 2022 has led to increasing challenges for businesses as banks adjust their foreign currency purchasing behaviors in light of reduced central bank interventions.
The private sector’s initiative to submit invoices to the Bank of Mozambique underscores the significant foreign currency shortages impacting businesses. The reduced liquidity in foreign exchange operations and increasing net purchases by banks illustrate a concerning economic trend. Understanding the relationship between these factors is crucial for effective policy responses and sustainability in Mozambique’s economic environment.
Original Source: clubofmozambique.com
