Photo: Lusa

Mozambican Net International Reserves (NIR) have reversed their declines, after the Government used them in March to settle the debt to the IMF, and grew to 3,503 million dollars (3,071 million euros) in May. These reserves—foreign currency necessary for the import of goods and services—had been growing every month since September, until reaching a historic high of 4,258 million dollars (3,733 million euros) in February, according to the history in the most recent statistical report of the Bank of Mozambique.

However, they fell 18% in March to 3,486 million dollars (3,057 million euros), and fell again in April, by almost 1%, to 3,470 million dollars (3,042 million euros). The trend was reversed in May, with an expansion of reserves equivalent to 1% in a single month.

The Ministry of Finance of Mozambique previously confirmed that it made a “full and early amortization” of 698,587,604 dollars (630 million euros) on March 23, settling loans contracted under the Poverty Reduction and Growth Trust (PRGT) of the International Monetary Fund (IMF), using the country’s NIR.

The Governor of the Bank of Mozambique, Rogério Zandamela, stated on May 25 that the Government’s decision to anticipate the full payment of 630 million euros of debt to the IMF did not affect the institution’s accounts, “on the contrary.”

“The Bank of Mozambique did not become weaker, more fragile, or vulnerable because of this decision. I would even say the opposite. Today we are secure, in light of certain risks that were being foreseen; we are much better off than we would have been had we not made this decision,” he stated, when questioned by journalists.

“We continue to have an extremely comfortable level of reserves. Today it practically covers five months of imports, which is quite high, so this did not weaken us. When it was done, we were in a position, and we continue to be, in an extremely comfortable position,” responded Zandamela, regarding the impact of using NIR to anticipate this payment and not in relation to other debt.

“The most important thing here for us, as the Bank of Mozambique, as the custodian of these reserves, is that the decision—I want to repeat this very strongly—to have paid the IMF in no way weakened the balance sheet of the Bank of Mozambique,” he emphasized.

The Mozambican President, Daniel Chapo, classified at the time as “courageous” the decision to fully and ahead of schedule settle the 630 million euro debt to the IMF using the reserves.

“This courageous decision must be seen in a positive and strategic light, as an unequivocal sign of macroeconomic responsibility and the strengthening of Mozambique’s international stability. And because, likewise, the dignity of a people is priceless,” said Chapo.

The previous volume of these reserves guaranteed the coverage of more than five months of imports of goods and services. However, in the face of complaints from businesspeople about a lack of foreign currency in banks, a Mozambican government source heard by Lusa in March had already admitted that the possibility of lowering this level of reserves was under study.

Despite the volume of the NIR, businesspeople continued to complain of difficulties in accessing foreign currency for imports. The situation was described in November by the president of the Confederation of Economic Associations (CTA) of Mozambique, Álvaro Massingue, as an “economic emergency.”

“The shortage of foreign exchange is today an economic emergency. Without external currency, companies cannot import raw materials, do not fulfill contracts, and do not grow,” Massingue stated at the time.

Source: Lusa