By Noémia Mendes
Maputo (MOZTIMES) – The Bank of Mozambique (BdM) announced new restrictions this week on the foreign currency positions of commercial banks, under a special regime set to last for one year. The move may further aggravate the country’s ongoing shortage of foreign exchange.
According to the financial system regulator, commercial banks will no longer be allowed to close the day with a net long foreign exchange position exceeding 2% or a net short position above 20% of their own funds. For individual currencies, the limits are even tighter, 1% for long positions and 10% for short.
The measure comes amid growing pressure in the foreign exchange market, with companies reporting increasing difficulties in accessing foreign currency. Economist Dimas Sinoia told MOZTIMES that the decision undermines the banks’ ability to manage risks associated with metical volatility.
“Capping the long FX position at just 2% of own funds significantly reduces banks’ ability to hold foreign currency reserves as a hedge against exchange rate depreciation,” said Sinoia. “This could limit their flexibility in an economy highly exposed to external shocks,” he added.
The expert explained that long positions in foreign currency act as a defensive tool to protect bank balance sheets during periods of instability.
“A bank with a long FX position holds more foreign currency assets than liabilities, ensuring greater capacity to meet foreign obligations even in the event of a metical devaluation. By restricting this buffer, banks become more vulnerable to risk,” Sinoia explained.
According to the economist, the central bank’s decision could also impact exporters and the private sector by reducing the availability of foreign currency in the financial system.
“The foreign exchange shortage is real. By imposing these limits, the Central Bank appears to be managing an artificial scarcity, but it may end up undermining market confidence and further restricting access to strong currencies,” he concluded. (NM)
