2 May 2014

Mozambique: Exchange Rates Relatively Stable, Says Central Bank

Maputo — The exchange rate of the Mozambican currency, the metical, against both the US dollar and the euro, remained relative stable in the first quarter of this year, according to the latest quarterly report on the economic situation from the Bank of Mozambique.

The Bank's spokesperson, Waldemar de Sousa, told reporters that on 31 March the metical was quoted on the interbank markets at 30.43 to the dollar. This was a monthly appreciation against the dollar of 0.69 per cent.

However, over the quarter as a whole the metical depreciated by 1.6 per cent against the dollar. The depreciation over the year from April 2013 to March 2014 was 1.16 per cent.

It was much the same picture with the euro. On 31 March there were 41.95 meticais to the euro - that was an appreciation over the month of 0.83 per cent, but a depreciation over the quarter of 1.7 per cent, and over the year of 8.76 per cent.

However, the exchange rate against the South African rand, the currency of Mozambique's major trading partner was rather different. The metical was quoted at 2.98 to the rand on 31 March.

The metical/rand exchange rate had undergone no significant change at all during the month. But during the quarter the metical had slipped in value against the rand by 4.56 per cent. Taking the entire previous year, the metical had appreciated against the rand by 9.7 per cent.

Sousa attributed exchange rate stability to the greater availability of foreign exchange on the exchange market, thanks to increased foreign direct investment, notably by companies exploiting Mozambican mineral resources.

This more than offset the demand for foreign currency by the commercial banks, particularly to pay the country's liquid fuel import bill.

One matter of concern is the decline in the world market price for some of Mozambique's main exports. In the year up to March, the price of aluminium fell by 10.8 per cent.

The aluminium ingots exported by the Mozal smelter on the outskirts of Maputo remain the country's largest export.

There was a substantial drop in coal prices, just at the moment when more coal mines are opening in Tete province, and the amount of coal mined and exported is increasing sharply.

Sousa said that over the year the price of coking coal had fallen by 32.7 per cent and of thermal coal by 15.5 per cent. Reduced demand in emerging markets, particularly China, was blamed for this.

Cotton prices rose by 2.6 per cent. This was not as much as hoped, largely because of falling demand from China which is increasingly switching to home grown cotton.

As for goods imported by Mozambique, the price of wheat rose by 4.4 per cent, blamed on harsh weather in the United States and Canada, and on a reduction in exports from the Ukraine because of the political turmoil there.

Rice, however, fell in price by 22.89 per cent, thanks to increased supplies from the main Asian producers. Mozambique hopes to become self-sufficient in rice eventually, but is still far from achieving that goal.

Oil prices fell over the year. The price of Brent crude fell by 1.68 per cent. Sousa attributed this to a slowdown in Chinese industrial production, and increased oil reserves in the US and the Middle East.

Mozambique's net international reserves increased by 165.7 million dollars in the first quarter of the year, to reach 3.161 billion dollars. This is enough to cover 4.4 months of imports of goods and non-factor services, if the imports of the mega-projects are excluded. But if they are included the coverage rate falls to 2.7 months.

The increase in the reserves is largely explained by the payment of 520 million dollars of capital gains tax by the US oil and gas company Anadarko. Indeed, without the Anadarko payment, the reserves would have declined in March.

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