Mozambican banks’ mandatory reserves reached a record €4.441 billion in December 2024, increasing by 15% from the previous year. Following two coefficient hikes aimed at controlling liquidity, the central bank has now eased restrictions, significantly impacting the economy. Business leaders have advocated for these changes in light of currency availability challenges.
In December 2024, Mozambican banks reported an unprecedented mandatory reserve level of 307.8 billion meticais, equivalent to €4.441 billion, reflecting a 15% annual increase. Data from the Bank of Mozambique indicates that these reserves have consistently set new records each month over the past eighteen months. Notably, between November and December 2024, the mandatory reserves surged by over 9%, rising from 237.092 billion meticais (€3.420 billion) in September 2023.
In January 2023, the Bank of Mozambique established the reserve coefficients at 10.5% for national currency and 11% for foreign currency. To mitigate excessive liquidity, which posed inflationary risks, the central bank increased the coefficients twice during the first half of 2023. The latest adjustment in June 2023 mandated that 39% of deposits in local currency and 39.5% in foreign currency be retained as reserves.
Since the end of December 2022, when reserves were only 62.144 billion meticais (€896 million), there has been an astounding increase of nearly 400%. Given the ongoing foreign currency scarcity in the domestic market, local business leaders have urged the central bank to reconsider the foreign currency reserve requirements. On January 27, following these appeals, the Bank of Mozambique’s Monetary Policy Committee reduced the reserve coefficients to 29% for national currency and 29.5% for foreign currency, to enhance liquidity and stimulate economic recovery.
In conclusion, Mozambique’s banks have achieved record-high mandatory reserves amid increasing regulatory measures. The central bank’s adjustments to reserve coefficients, notably a recent reduction, aim to address liquidity challenges faced by businesses and stimulate economic revival. These developments highlight the dynamic nature of Mozambique’s banking system and the central bank’s proactive responses to foreign currency shortages and inflationary pressures.
Original Source: clubofmozambique.com
