Access to foreign currency in Mozambique should continue to be “easy” despite new restrictions

10 October 2011

London, United Kingdom, 10 Oct – Access to foreign currency in Mozambique should continue to be easy in the future, as recently introduced restrictions are being applied in a “liberal” way, according to the Economist Intelligence Unit.

The new rules, which were announced by the Mozambican central bank in July and which recently began to be implemented, outline that any exporter of goods and services should receive 50 percent of payments in foreign currency converted into meticals on their arrival in the country.

They also make approval from the central bank a requirement to open any bank account in foreign currency, although existing individual accounts are not affected, the latest EIU report on Mozambique said.

“If they were applied strictly, the new rules could have a significant impact, both on individuals, and on companies,” the EIU analysts said.

But, given the “liberal” way in which the rules are being applied, “it seems like a relatively small inconvenience for companies, rather than a heavy burden. Access to foreign currency in Mozambique should continue to be easy in Mozambique, generally-speaking.”

For travel purposes, access to foreign currency is restricted to US$5,000 per transaction and transactions will have to be carried out by retail banks, rather than foreign exchange houses.

“The main aim of the new law is to improve the monetary base and help to “undollarise” the economy, promoting the metical as the main currency unit, which is a praiseworthy aim,” the report said.

“What is also laudable is that the measures will help in the fight against money laundering,” although these types of criminal more often make use of non-official foreign exchangers of more sophisticated channels, such as creating companies of buying properties for cash.

According to the EIU, so far the government ahs adopted a “liberal approach,” to the new law, allowing the “relatively unrestricted use of foreign currency accounts and transactions based on foreign currency.”

The new rules, it said, go against the trend of the last few years and could be “somewhat draconian,” depending on how discretionary elements, such as the approval of foreign currency accounts, are implemented.

Another potentially negative effect, according to the EIU analysts, is that tighter control of foreign currency could widen the gap between the official exchange rate and the black market, which would be prejudicial for the trust placed in Mozambique’s national currency.

For companies the requirement of exchanging currency at official banks could become an additional complication as they are “slow and few,” and the need to request approval for large transactions in foreign currency could cause delays.

The Mozambican economy is expected to continue to grow this year after posting growth of 8.4 percent in the first quarter, against 6.6 percent in the final quarter of last year.

The government’s projection for GDP growth this year, which the EIU says is “achievable,” is of 7.5 percent. (macauhub)