30 January 2013

Mozambique: Central Bank Warns of International Uncertainty

Maputo — Uncertainty about whether the sovereign debt crisis in the Euro Zone is coming to an end demands permanent monitoring by the Mozambican authorities to remove the danger of the contagion spreading to the Mozambican financial system, declared the governor of the Bank of Mozambique, Ernesto Gove, on Wednesday.

Speaking at the opening of a meting of the Consultative Council of the Bank, in the northern city of Pemba, Gove warned that “the economic prospects for 2013 point to the prevalence of an adverse and uncertain international conjuncture, particularly in the most advanced economies, where a reduction in the expansion in economic activity, with an increase in unemployment, are expected”.

Despite these clouds on the international horizon, Gove said that the consolidation of macro-economic stability and of the Mozambican financial sector will remain the main objective of the bank throughout this year.

The central bank, he stressed, must contribute to achieving the goals laid down in government economic policy – namely a real GDP growth rate of 8.4 per cent, an annual inflation rate of no more than seven per cent, and net international reserves that cover 3.8 months of imports of goods and services (this means lower reserves than in 2012, when the reserves usually covered five months or more of imports).

Achieving these macro-economic goals, said Gove, would require strengthened policy coordination between the bank and the government.

He added that the management of monetary policy will continue to prioritise interventions in the inter-bank money and exchange markets, in order to ensure exchange rate stability, and to regulate liquidity, with the ultimate goal of attenuating possible foci of inflation.

Use of the available instruments on the inter-bank markets (mainly interest rates), plus government banking supervision, was intended to limit growth in the money supply in 2013 to 18.4 per cent. Bank credit to the private sector could be allowed to grow by 19 per cent.

Gove said that the central bank’s supervision over commercial banks and financial companies will be strengthened, “to guarantee compliance with the normative principles in force, taking precautions against the occurrence of systemic risks”.

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