Maputo — The Mozambican parliament, the Assembly of the Republic, on Wednesday passed the first reading of a government bill designed to make the country's currency, the metical, more manageable, by lopping off the last three digits.

The bill establishes a rate of conversion of one to a thousand. Thus the current 1,000 metical coin will be worth one metical in what the government refers to as the "new family" of the currency. The largest current banknote, for 500,000 meticais, will be worth 500 meticais in the "new family". The metical was introduced in 1980 to replace the colonial currency, the escudo, and started off at parity with the escudo, and an exchange rate of about 40 to the US dollar. In those days the smallest coin was for 50 centavos (half a metical), and the largest note had the face value of 1,000 meticais.

But huge devaluations in the late 1980s and early 1990s, pushed the exchange rate up until it eventually reached the current 29,000 meticais to the dollar. Small items cost thousands of meticais, and even the statutory minimum wage is now over a million meticais.

Introducing the bill, Finance Minister Manuel Chang argued in favour of knocking off the last three zeroes, on grounds of efficiency and convenience. Book-keeping is more difficult, and more prone to errors, when sums have to be written in millions or billions. Companies, he said, found that the columns in their books were just not wide enough to accommodate all the zeroes. Certain computer programmes could not be used for Mozambican accounts because there were too many digits.

Chang said that, with inflation fairly low (it is expected to be well under ten per cent this year), and with the macro- economic stability of recent years, the time had come to adjust the currency.

The bill gives the Bank of Mozambique the power to design the new notes and coins, which should enter circulation in January. For a transitional period the old notes and the new notes will both be used, and shops and other businesses must express their prices in both old and "new" meticais.

"Reducing the number of digits will not affect purchasing power", Chang insisted. All that was involved was a mathematical operation of dividing by a thousand. As the old notes come into banks, so they will be withdrawn from circulation. This, Chang said, had no implications either for the state budget or for the budget of the Bank of Mozambique.

Every year the Bank of Mozambique withdraws old notes and issues new ones, paid for out of its own budget. The only difference this time is that the notes will bear different designs.

In fact, the Minister argued, issuing costs could be cut with the new notes, which will be of better quality and will last longer.

Chang stressed that the name of the currency remains the same - the metical. Knocking off the zeroes was, in his view, just an accounting operation, which did not mean that Mozambique was switching to a new currency. This was the third metical "family" - the second, Chang reminded deputies, happened after the Constitution of 1990 changed the name of the country from the "People's Republic of Mozambique" to the "Republic of Mozambique". The banknotes issued after this decision were different because they bore the country's new name.

But the opposition Renamo-Electoral Union coalition insisted that the government was changing the currency, and since the currency is established in the constitution, this was equivalent to a constitutional amendment - and thus it needed a two thirds majority in the Assembly.

"How is this not an alteration of the currency ?", asked Renamo deputy Jose Manteigas. "Implicitly you are saying there will be two currencies in circulation. Is this an attempt by the current government to distinguish itself from the former one ?" Luis Boavida demanded to see the design of the new notes and coins. "We're being asked to approve something to which we have not been given access", he claimed.

Chang retorted that the only thing the government was taking to the Assembly was the conversion rate of 1,000 to one.

Everything else (including the design of notes and coins) was in the hands of the central bank.

"The name of the currency is the same", he said. "We don't want to change the currency. We just want to change the number of zeroes".

Renamo also complained that banknotes carry the national emblem, and the emblem is under discussion in the Assembly. Jose Palaco suggested this was a way for the Frelimo majority to sabotage discussion of the emblem.

Others argued that costs would be incurred - because new notes would be printed with the existing emblem, then another set of notes would be required when the emblem was changed.

But in fact, there is no legal requirement for the Bank of Mozambique to put the emblem of the Republic on the notes at all.

When it came to a vote, Renamo insisted on the "prior question" of a two-thirds majority. Was this a substantive change to the currency which required such a majority ?

The majority Frelimo Party did not think so, and so Renamo lost that vote by 155 to 79.

On the first reading of the bill itself, the Renamo deputies all abstained, and so it was passed by 155 votes to none, with 79 abstentions.