Photo – Mozambique’s Minister of Finance Carla Louveira
As global economic pressures intensify and domestic recovery remains uneven, the Bank of Mozambique is making a bold pivot. In a recently announced set of monetary and regulatory measures, the central bank is aiming to inject greater flexibility into debt management systems, improve foreign exchange liquidity, and stabilize financial intermediaries amidst a fragile macroeconomic backdrop.
Key among the reforms is the increase in the mandatory conversion rate from 30% to 50% of revenues from the export of goods, services, and investment income earned abroad—a move expected to bolster the metical’s strength and stabilize foreign currency reserves. Alongside this, the implementation of a repatriation and conversion regime for re-exported petroleum products signals Mozambique’s attempt to capture more value from its growing role as a transit and energy trade hub in Southern Africa.
But what’s driving this policy recalibration—and what does it reveal about Mozambique’s broader economic posture?
Mozambique’s economy, though rich in natural resources, remains structurally challenged and externally vulnerable. The country’s real GDP growth rebounded to approximately 5% in 2023, following successive years of economic stagnation triggered by cyclones, insurgency in Cabo Delgado, debt scandals, and the economic ripple effects of COVID-19.
The country’s trade profile is dominated by coal, aluminium, natural gas, and electricity exports, with key trade partners including South Africa, China, India, Portugal, and the Netherlands. According to the World Bank, Mozambique’s export earnings in 2023 stood at over $8.5 billion (approx. MZN 540 billion / €7.8 billion), but the structure remains narrow and highly commodity-dependent, making the country susceptible to price volatility in global markets.
Meanwhile, imports exceeded $9 billion (approx. MZN 570 billion / €8.3 billion) in the same period, underscoring a persistent trade deficit that contributes to the pressure on foreign reserves and the metical (MZN), Mozambique’s currency.
The 50% Conversion Policy: Strengthening FX Stability. Under the new directive, Mozambican banks must now convert 50% of export revenues into local currency (MZN), up from the previous 30%. This applies to revenues generated from not only goods and services, but also investment incomes earned abroad.
For the Central Bank, this policy serves a dual purpose. To first stabilize the metical by increasing supply of foreign currency within the domestic economy, and then, to boost liquidity in the financial system and support government financing. Both to be achieved without over-reliance on external debt or inflationary borrowing.
The move comes amid a broader trend across Africa, where central banks are increasingly tightening capital controls and incentivizing repatriation to protect against external shocks.
Petroleum Product Re-Exports, A Quiet Boom. Another key feature of the new policy is the creation of a specific regime governing petroleum re-exports, a sector that has quietly gained traction as Mozambique’s ports—particularly Maputo and Beira—become strategic routes for fuel transit to neighboring landlocked countries such as Zimbabwe, Malawi, and Zambia.
The Central Bank now requires mandatory repatriation and conversion of revenues from petroleum re-export activities. This will be enforced over the next 18 months, during which banks must ensure conversion of earnings into local currency.
This is a critical shift. Previously, many foreign currency revenues from these operations were either retained abroad or recycled in offshore accounts. The new system is expected to capture more foreign earnings, improve currency transparency, and increase fiscal discipline, especially amid rising global fuel prices.
Exceptional Regulatory Provisions: A Cushion for Banks. In recognition of the strains on the financial sector, the Bank of Mozambique has also approved an exceptional regime regarding minimum regulatory provisions on overdue credit, applicable for 12 months. This measure gives banks greater breathing space to manage non-performing loans (NPLs)—a growing concern in Mozambique where bad loans represented over 9% of total banking assets in 2023.
By easing regulatory burdens temporarily, the central bank is trying to prevent a credit squeeze, where banks, fearing non-compliance, cut back on lending at a time when the economy needs stimulation the most.
A Pragmatic Monetary Pivot or Risky Gamble? The Central Bank’s strategy reflects a pragmatic response to mounting internal and external pressures. With Mozambique’s public debt hovering above 95% of GDP, and the country facing a $727 million (approx. MZN 46 billion / €670 million) debt servicing bill in 2025, flexibility in currency and banking operations could provide short-term relief.
However, critics warn that increased conversion requirements may deter exporters, especially in capital-intensive sectors like mining and agriculture, who might prefer retaining earnings in stronger currencies like the US dollar. Others point out the risk of capital flight or underreporting of exports if trust in the financial system weakens.
The Road Ahead: Balancing Control and Growth. Mozambique’s macroeconomic management is entering a crucial phase. On one hand, its liquefied natural gas (LNG) projects, led by TotalEnergies and ENI, are poised to transform the country into a top 10 global LNG exporter by the early 2030s. On the other hand, the government must shore up institutional trust, improve transparency, and ensure macro-fiscal credibility to fully reap these gains.
The Central Bank’s latest measures reflect an attempt to get ahead of systemic risks, stabilize currency flows, and support domestic banks under strain. But it also signals that Mozambique is entering a more controlled economic environment—one that could either foster resilience or tighten economic freedoms.
Exchange Rate Reference (April 2025): 1 USD = MZN 63.5 | 1 EUR = MZN 69.2. Currency conversions are approximations based on prevailing mid-market rates.
