Mozambican economists predict that the end of the Bank of Mozambique's contribution to fuel import bills will worsen people's living conditions.

The Bank of Mozambique has announced that it will no longer support fuel imports, a decision that has not been well received by economists and the business community.

Economist Estrela Charles told VOA that in 2022, the Central Bank's main objective was to control inflation, and as a result, the exchange rate did not fluctuate much.

"This means that the Bank of Mozambique used the reserves it had, of around six months, to avoid fluctuations in the exchange rate, but at the moment it can no longer use the reserves to stabilize the exchange rate, and it already has two months of reserves," said the economist.

Charles emphasized that "the reserves are at their limit, because we are two months into imports and we know that our country is all consumer and depends on imports".

He said that Mozambique "can't have less than two months of net international reserves, because the Bank of Mozambique will have a lot of trouble buying fuel, weapons and other things we need".

The Central Bank says that there is an excess of foreign currency on the market and therefore wants to dry it up. It is doing this in two ways, by cutting support for fuel imports and increasing the rate of compulsory reserves for foreign currency, i.e. everything that is excess currency in the national bank.

But according to the economist, "our banking system is very unstable and it could happen that there isn't the excess of foreign currency that the Bank of Mozambique is predicting, and if there isn't, it means that there will be a lot of demand for foreign currency and this could lead to an increase in the exchange rate".

She said that an increase in the exchange rate means that all goods and services will increase, including fuel itself, so there is a very high risk that the policy being implemented by the Bank of Mozambique will not be effective, precisely because of the increase in the exchange rate.

For his part, economist Egas Daniel said there needed to be greater coordination between the Bank of Mozambique and other players involved in fuel imports, in order to avoid disruptions arising from a possible lack of foreign currency.

The president of the Confederation of Associations of Mozambique, Agostinho Vumba, expressed his concern about the measures that the Bank of Mozambique has been adopting, and advocated monetary policy measures adjusted to the country's economic reality.

Meanwhile, the administrator of the Bank of Mozambique, Silvina de Abreu, said that the Central Bank's contribution to fuel import invoices dates back to 2005 and used to be 100 percent, because there were large amounts, ranging from 10 to 20 million dollars in a single invoice, making it unbearable for a bank or group of banks to bear.