Mozambican banks’ mandatory reserves hit a record €4.441 billion in December 2024, up 15% year-on-year. The Bank of Mozambique adjusted reserve requirements to manage liquidity and inflation, significantly increasing reserve amounts since late 2022. Recent cuts to foreign currency reserve coefficients aim to boost economic recovery.
In December 2024, mandatory reserves held by banks in Mozambique reached a record 307.8 billion meticais, equivalent to €4.441 billion, marking a 15% increase from the previous year. The Bank of Mozambique’s data reveals that these compulsory deposits have consistently broken monthly records over the past 18 months, with a significant rise from September 2023’s total of 237.092 billion meticais (€3.420 billion). Notably, reserves surged by over 9% between November and December 2024 alone.
The Bank of Mozambique established the mandatory reserve coefficients at 10.5% for national currency and 11% for foreign currency in January 2023. In the first half of 2023, the central bank adjusted these coefficients twice to mitigate excessive liquidity in the banking sector, which could lead to inflation pressures. By June 2023, the required reserves escalated to 39% for national currency deposits and 39.5% for foreign currency deposits.
Since the end of December 2022, when total reserves stood at 62.144 billion meticais (€896 million), the amount has surged by almost 400%. Amid a shortage of foreign currency in the local market, business stakeholders have advocated for the central bank to mitigate the mandatory foreign currency reserve requirements. The central bank responded by adjusting these coefficients on January 27, lowering the mandatory reserves for national currency to 29% and for foreign currency to 29.5%. The decision aimed to enhance liquidity, thereby supporting economic recovery and the supply of goods and services.
In summary, Mozambique’s banks have seen their mandatory reserves reach an all-time high of €4.441 billion, reflecting a pronounced increase over the past year. The adjustments in reserve coefficients by the Bank of Mozambique demonstrate a proactive approach to managing liquidity and inflation. The recent cuts to reserve requirements indicate an effort to ease foreign currency constraints and support economic activity, facilitating the restoration of productive capacity in the market.
Original Source: clubofmozambique.com
