Mozambican high exchange rate caused by speculation, says minister

metical

The current exchange rate of the Mozambican currency, the metical, against the US dollar and other foreign currencies is the result of “large scale speculation”, according to the Minister of Economy and Finance, Adriano Maleiane.

Interviewed by the independent television station STV, Maleiane said that “according to parity purchasing power, and bearing in mind inflation in the neighbouring countries, particularly South Africa, and the general level of prices in Mozambique, a dollar should cost 55 or 56 meticais”.

But the current exchange rate, as quoted by the country’s largest commercial bank, the Millennium-BIM, is 75.1 meticais to the dollar.

The difference between 55 and 75 meticais, Maleiane said “is pure speculation. People are charging whatever rate they like in the perspective of making gains”.

Mozambique's Economy and Finance Minister Adriano Maleiane
Mozambique’s Economy and Finance Minister Adriano Maleiane

He added that the government has been forced to dip into the country’s international reserves to acquire essential goods such as fuel and medicines, and to cover the deficit of 500 million dollars, which would normally be covered by the country’s international partners.

The International Monetary Fund (IMF), the World Bank and all the donors who support the state budget have suspended all financial aid because of the undisclosed government guaranteed loans inherited from the previous government, headed by President Armando Guebuza. These undisclosed loans amount to over a billion US dollars.

Maleane believed that the best way to overcome the deficit is to increase exports “but this doesn’t happen from one day to the next”. Currently the country’s exports amount to around three billion dollars a year – which is less than half of the import bill of seven billion dollars a year.

Complicating matters were the attacks on the main roads in the centre of the country by gunmen of the Renamo rebels. “With attacks, it’s not possible to make things work normally”, said Maleiane. “And if I can’t export or sell goods, why should I produce them?”

These difficulties had forced the government to reduce its forecast for this year’s growth rate from seven per cent to 4.5 per cent.

“And the consequence of this is inflation, because we are not producing at the level we should”, said Maleiane. “Or if we do produce, the goods cannot move. For instance, to send a truck from Maputo to the north, the insurance costs nowadays are very expensive. This is reflected in the final price, and so we have high prices”.

The most important step that could be taken would be to end Renamo attacks at once. “I can guarantee that, on the day we stop these attacks, and people move around normally, prices will fall”, declared the Minister.

Source: AllAfrica