The American financial services company Visa has set an artificial exchange rate for the Mozambican currency, the metical, which is dramatically at odds with the exchange rates practiced by Mozambican banks, and regulated by the Bank of Mozambique, reports Monday’s issue of the independent newssheet “Carta de Mocambique”.
The average exchange rate on the Mozambican exchange market is currently about 58 meticais to the US dollar. But Visa has fixed an exchange rate of 75 meticais to the dollar. This amounts to a massive loss for anyone trying to buy goods online with a Visa card.
Even when the metical was depreciating earlier this year, it never fell so low as 75 to the dollar. Now, thanks to the monetary policies pursued by the Bank of Mozambique, the metical has bounced back strongly – but Visa refuses to recognize this.
The strengthening of the metical comes despite the Covid-19 pandemic, the insecurity in parts of the country, and declining production in many sectors of the economy. The strength of the metical is a tribute to the central bank’s success in fighting against inflation – but Visa has refused to recognize this.
Also read: Mozambique’s Metical expected to devalue and end year at 74 per U.S. dollar – Fitch Solutions
There is nothing that obliges Visa to use the same exchange rate as the Bank of Mozambique. But the difference between the market rates in Mozambique, and the Visa rate is now so stark that it is seriously damaging Mozambican consumers who use Visa cards.
One consumer, cited by “Carta de Mocambique”, said she had protested to her local bank, over the money taken from her account to pay a Visa debt. “I was told that Visa, the owner of the card, applies a different exchange rate from that used on our market”.
She could see nothing rational in being debited 75 meticais per dollar spent when the Mozambican exchange rate on that date was 57 meticais to the dollar.
Economist Joao Mosca told the paper that Visa may have considered that the exchange rate used by the Bank of Mozambique “does not reflect the current economic situation of the country. It has understood that the market might be being manipulated, with the injection of foreign currency, which is allowing the appreciation of the metical”.
Another institution that fixed its own exchange rate – and again, at 75 meticais to the dollar – was the Mozambican publicly-owned electricity company, EDM, but the outcry was such that, on Monday EDM backed down.
EDM justified its artificial exchange rate as a way of maintaining the value of wages and allowances paid to its staff.
For some of EDM’s staff, part of their remuneration is fixed in dollars, although paid in meticais. With the rapid appreciation of the metical, the EDM staff could be taking a pay cut. The decision to fix an artificial exchange rate came in an internal EDM circular dated 6 May, which said that in converting the dollar part of remuneration and pensions into meticais the exchange rate of 75 meticais to the dollar would be used, “with effects as from April 2021”.
This move was denounced for being unethical and illegal. A former chairperson of the Mozambican Bar Association (OAM), Flavio Menete, told the independent television station, STV, that there is no legal basis for EDM to fix its own exchange rate.
The storm on social media over EDM’s behavior showed no sign of abating, and on Monday an extraordinary general meeting of the company, attended by the Government’s Institute for the Management of State Holdings (IGEPE), annulled the 6 May circular.
The meeting also decided that all payments of wages and allowances will be in meticais, and in those cases where this involves the conversion of dollars into meticais, the average exchange rate of the day on the Mozambican exchange market will be used.