Banking Economy Finance Government Mozambique

Maputo warn against politicizing depreciation of national currency

Approximate reading time: 2 minutes

Mozambican Prime Minister Carlos Agostinho do Rosario has said in Maputo on Wednesday that the depreciation of the country’s currency, metical, should not be politicized.

Metical continues to drop tremendously against the U.S. dollar in recent days.

Prime Minister Carlos Agostinho do Rosario
Prime Minister Carlos Agostinho do Rosario

Speaking in the parliament, do Rosario said metical was not the only currency to depreciate in the globe, in response to the questions raised by the opposition parties about the government’s ability to stabilize the country’s economy.

The southern African country’s currency has depreciated nearly 50 per cent against the U.S. dollar this year.

According to the current exchange rate released by the country’s central bank, 52.5 meticals equalled to one U.S. dollar on Wednesday.

“Recent data referred to the month of November, show that our currency, the metical, depreciated against the U.S. dollar, a situation which worries all of us, due to its impact in the increase of expenditure in the internal production, because the country import more than what it produces,” said do Rosario.

“As you can see, the depreciation of the metical is not only a problem for our country, but also a problem of global exchange rate nature which reflects the recuperation of the United States economy from the 2008 economic crisis,” he said.

The depreciation of the currency has already resulted in the shooting up of prices of goods in the country, in the capital city Maputo particularly.

The country’s former Prime Minister, Mario Machungo, said last week that the increase in prices could create social tensions in the country.

Machungo urged greater collaboration between the banking sector and the Bank of Mozambique “to stabilize the currency.”

At the end of October, Mozambique has requested financial assistance, a loan of 286 million U.S. dollars, from the International Monetary Fund (IMF) for the first time in a decade, to cover the sharp devaluation of the metical, falling foreign currency reserves, rising inflation, reduced foreign investment and foreign aid and rising debt.

IMF lowered its estimation for Mozambique’s growth prospects, from 7 percent to 6.3 percent in 2015.

It said inflation in the country is expected to increase towards 5 to 6 percent over the next few months, due to the recent depreciation of the metical.

The institution said that Mozambique is currently experiencing an “external shock” associated with the drop in commodity prices, lower growth in trading partners, and delays in investment associated with large natural resource projects.

In addition to the falling of currency, Mozambique also registers a low foreign exchange reserves this year, which stood at 2.3 billion U.S. dollars by September, down by 292 million U.S. dollars from last June.

Source: Xinhua/CoastWeek

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