Fitch Solutions issued a report yesterday in which it posits that it expects the Mozambican currency to depreciate and settle at 74 meticais per dollar by the end of the year, after a significant appreciation in recent weeks, among the largest in the world.
“We anticipate that the metical will depreciate from 55 per dollar to 74 meticals per dollar by the end of this year, following a strong appreciation recorded in March and April “, reads a comment on the evolution of the Mozambican currency.
Fitch analysts consider that “the risks of inflation will decrease during the rest of 2021, reducing the need for further interventions by the Central Bank and thus allowing the metical to resume the trend of gradual depreciation”.
The metical has appreciated significantly, from 75 meticais per dollar on 1 January, to the highest value of the last five years on April 15, when it only took 55.1 meticais to buy a dollar, “becoming the second most-valued currency since the beginning of the year, worldwide”, reads the report.
Also read: Mozambique: Metical appreciated 35% this year, but earnings expected to reverse – Standard Bank
In the last week, the Mozambican currency depreciated slightly, trading now at 57 meticais per dollar, compared to 55 per dollar on Monday.
Analysts believe that the currency is overvalued and that the current value “does not reflect favorable macroeconomic conditions”, noting that twin deficits (budgetary and external) increased in 2020 due to the impact of the pandemic, and that the attacks in the north of the country “have hampered the country’s attractiveness as an investment destination.”
The appreciation of the metical follows a decrease of about 10% during the past year in its value in relation to the dollar, and appears in counter-cycle with the forecasts of most analysts, who foresaw an even greater fall of the metical this year.