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Mozambique increases sales of foreign currency to shore up national currency

Xinhua, September 16, 2015 Adjust font size:

Mozambique's central bank, the Bank of Mozambique, has decided to increase its sales of foreign currency in order to shore up the national currency, the metical, without saying how much it intended to sell, local news agency reported on Tuesday.

The state news agency AIM quoted a statement from the latest monthly meeting of the bank's Monetary Policy Committee, as saying that the bank seems determined not to raise interest rates as a way to support the metical.

The committee announced that the Standing Lending Facility, the interest rate paid by the commercial banks to the central bank for money borrowed on the Interbank Money Market, will remain at 7.5 percent.

Besides, the Standing Deposit Facility, the rate paid by the central bank to the commercial banks on money they deposit with it, remains at 1.5 percent, and the Compulsory Reserves Coefficient, the amount of money that the commercial banks must deposit with the Bank of Mozambique, is also unchanged at eight percent.

The statement said that in August the metical had come under pressure "in all sections of the exchange market" and in relation to all major currencies, and particularly the U.S. dollar.

At the end of August, the U.S. currency was quoted on the inter-bank exchange market at 40.12 meticais to the dollar, a depreciation of the metical of 3.7 percent over the month.

Since the beginning of the year, the metical had devalued about 27 percent against the dollar, and over the entire previous year, the depreciation was 31.5 percent.

The metical continued to slip in early September, reaching 44.8 meticais to the dollar in the commercial banks last Thursday.

The depreciation of the metical has not yet led to significantly higher prices across the country. The figures released by the National Statistics Institute (INE) show that inflation, as measured by the consumer price indices in the three largest cities, Maputo, Nampula and Beira, was only 0.21 percent in August. Endit