The Bank of Mozambique (BM) warns that the excess of money in the national banking system could raise the cost of living in the country, so the Monetary Policy Committee has decided to increase the rate of deposits that financial institutions must make per obligation at the BM as a reserve, by 11%.

The Obligatory Reserves coefficients for liabilities in national currency rose from 28.0% to 39.0%, and in foreign currency from 28.5% to 39.5%, said the bank's Governor quoted by the The Country.

The measure aims to absorb excessive liquidity in the banking system, which has the potential to generate inflationary pressure.

Meanwhile, the governor of the Bank of Mozambique, Rogério Zandamela, predicts inflation of less than 10% over the next few years.

The Bank of Mozambique also reminds the government that public spending is very high, compared to the revenue collected by the state, which also constitutes a high risk for the national economy.

"Domestically, there is continued pressure on public spending, in a context of weak revenue collection, and uncertainties about the evolution of the price of administered goods, especially liquid fuels. On the external front, there are uncertainties about the effects of the prolonged conflict between Russia and Ukraine on the dynamics of commodity prices, as well as the volatility of the financial markets," said Zandamela.

The Bank of Mozambique also reminds the government that public spending is very high, which also constitutes a high risk for the national economy.

"Domestic public indebtedness, excluding loan and lease contracts and overdue liabilities, stands at 302.8 billion Meticais, which represents an increase of 27.7 billion compared to December 2022," the Bank of Mozambique said in a statement.

Regarding economic activity, the central bank says that in the first quarter of this year, the national economy grew by 4.2%, mainly due to the good performance of the extractive industry. And for this year and next, not counting natural gas projects, the central bank foresees moderate economic growth. (O Pais)