Maputo, Mozambique — The Bank of Mozambique has insisted that the country faces no foreign currency shortage despite the continuing sharp depreciation of the Mozambican currency, the metical, against the US dollar.
In Maputo's foreign exchange houses the quotation for the dollar is now around 20,000 meticais. At the end of March the exchange rate was around 18,500 meticais to the dollar, and a year ago it was about 15,000 meticais to the dollar.
Within 12 months, the metical has lost a third of its value. A senior spokesperson for the Bank of Mozambique, cited in Monday's issue of the independent newsheet "Metical", denied that the devaluation was caused by too many meticais chasing too few dollars.
He said the central bank has guaranteed the supply of dollars for imports through the interbank money market. He said the demand from businesses for foreign currency had been fully satisfied, and could see no reason at this level for the sharp slide in the metical's value.
Some years ago, falls in the value of the metical were blamed on excessive demand by business for foreign currency, and a shortage of liquidity in the banking system, partly caused by delays in disbursing balance of payments support from donors.
But a "Metical" source insisted that this was not the case nowadays. Instead he thought that the currency was suffering from uncertainties about the country's political and economic future.
He thought that the roots of the current problem lay in an expansion in the money supply in late 1999 by over 40 percent compared with between 15 and 20 percent in the two previous years.
The expansion was to deal with the 1999 election campaign, and the problems associated with the computer problem known as the "Millennium Bug".
This was followed by the refusal of the main opposition party, the former rebel movement Renamo, to accept the election results, and the catastrophic floods of February 2000, which slashed the country's growth rate.
After the floods, businesses tried to force down real wages, a tactic which blew up in their faces when the trade unions threatened a general strike.
Towards the end of the year came a series of violent events - the clashes between the police and Renamo demonstrators on 9 November, the death of at least 86 detainees in a police cell in the northern town of Montepuez, and the murder of the country's foremost journalist, "Metical" editor Carlos Cardoso.
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The resurgence of urban crime contributed to a climate of increased fear, and the announcement of huge losses made by the two privatised commercial banks, the BCM and Banco Austral, did nothing to raise confidence in the financial system.
In the opinion of the central bank source, this deteriorating climate had made businessmen nervous, and so they were rapidly converting their meticais into hard currency, much of which has doubtless been exported.
This has a snowball effect. If the metical is seen to be weak now, then it is likely to weaken still further, and no end to the slide is in sight.
Devaluation has a serious impact on wages. Thus the wage increase announced this month is, in theory, 17 percent. But when the figures are converted into dollars, it can be argued that real wages have fallen.
When the statutory minimum wage was fixed at 568,980 meticais a month in July 2000, that was worth about 37 dollars.
This month's rise brings the minimum wage up to 665,706 meticais a month - which is only 33.3 dollars.
Because of Mozambique's high dependence on imports, devaluation inevitably fuels inflation, which in turn is likely to lead to increased labour discontent and pressure for a further rise in the minimum wage before the end of this year.
