Mozambican banks’ mandatory reserves reached a record €4.441 billion in December 2024, up 15% from the previous year. The reserves have broken monthly records consistently for 18 months. The Bank of Mozambique increased reserve coefficients twice in early 2023 to combat inflation but recently lowered them to aid economic liquidity and productivity.
In December 2024, the mandatory reserves of Mozambican banks reached a record 307.8 billion meticais (€4.441 billion), representing a 15% increase over the previous year, according to the Bank of Mozambique. These reserves have been on a consistent upward trend, setting monthly records for a year and a half. The amount was significantly higher than the 237.092 billion meticais (€3.420 billion) reported in September 2023, with an increase of over 9% noted between November and December 2024 alone.
The Bank of Mozambique had established mandatory reserves at coefficients of 10.5% for national currency and 11% for foreign currency as of January 2023. Subsequently, in the first half of 2023, these coefficients were raised twice to mitigate excessive liquidity in the banking sector, which posed a risk of inflation. By June 2023, the coefficient rose to 39% for national currency deposits and 39.5% for foreign currency.
Since the end of December 2022, the reserves held by the central bank have surged nearly 400% from just 62.144 billion meticais (€896 million). In light of recent foreign currency shortages in the domestic market, local entrepreneurs have urged the central bank to reconsider the mandatory foreign currency reserve requirements. This led to a pivotal decision on 27 January, wherein the Monetary Policy Committee of the Bank of Mozambique reduced the mandatory reserve coefficients for both currencies to 29% and 29.5%, respectively, aiming to enhance liquidity and support the economy’s productive capacity.
The remarkable rise in mandatory reserves held by Mozambican banks demonstrates a significant shift in the banking sector, with a notable increase from €896 million to €4.441 billion over a period of just over a year. The adjustments in reserve coefficients by the Bank of Mozambique reflect proactive measures to manage liquidity and inflation, while the recent changes in foreign currency reserve requirements highlight the central bank’s commitment to supporting the economy amidst currency shortages.
Original Source: clubofmozambique.com
