La vue d'ensemble
The Monetary Policy Committee decided to reduce the standing lending facility by 50 bp, to 9%.
Mozambique Central Bank Keeps Benchmark Rate Unchanged at 9 .5%
Mozambique monetary policy14/02/2012
Debt vs GDP / Bonds vs bills
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All Data - Mozambique
|GDP (billions US$)||11.34||14.60||16.58||16.53||-||-|
|Total Outstanding Amount (Billion US$)||1.21||1.26||1.45||-||-||-|
|Outstanding Amount/GDP (%)||10.63%||8.63%||8.72%||0.00%||-||-|
Mozambique has a shallow and small financial industry. The banking industry is composed of 18 commercial banks; 4 are foreign owned and dominate the market. Despite the lack of depth in the financial industry, the financial sector has been growing, and overall financial intermediation has deepened as banks’ branch networks have expanded to sub-urban and rural areas.
Lack of access to credit characterizes the Mozambican financial industry. Despite efforts by the government to make credit more accessible, access to credit by the private sector and individuals remains difficult and expensive, with average one year at around 20%. This situation is further complicated with access to capital in the rural areas is constrained because land leases are not accepted as collateral.
The capital markets in Mozambique are under-developed. The Mozambican stock exchange, the Bolsa de Valores de Moçambique (BVM), also knowm as the Maputo Stock Exchange, was opened in October 1999, with the support of the Lisbon Stock Exchange and the World Bank. It is responsible for the management of the centralised, secondary securities market, and has sought, throughout its existence, to develop, broaden, consolidate and empower the Mozambican capital market on an on-going basis. At present, the BVM offers national and foreign investors a range of short and long term financing products, which benefit from important tax benefits.
While treasury bills and repo markets exist in Mozambique, these markets are restricted to local investors. The Central Bank, Banco de Moçambique, has undertaken a series of measures to strengthen monetary management, through daily liquidity forecasting and the use of foreign exchange and Treasury bill sales to sterilize the changes in the monetary base that are associated with balance-of-payments shocks.
Treasury bills are issued to manage liquidity in the money market though open-market operations in the domestic financial market and to provide short term funding to the government. Funds raised from the issuance of treasury bills are transferred on request to the government, at the same interest rate quoted in the market and with a maturity agreed with the government.
Politique monétaire et gestion de la dette publique
Monetary policy operations and public debt management
The Banco de Moçambique is responsible for designing and conducting foreign exchange and monetary policy. Its primary role is to keep inflation under control. It has adopted a monetary targeting approach but has the intention to switch to an inflation targeting monetary framework.
To conduct its policies, the Central Bank uses the following instruments:
- Open Market Operations
- Rediscount and refinancing rate (which are positive, in real terms)
- Reserve Requirement Rate
- The interest rate of the Banco de Moçambique
Treasury bills are used to contain liquidity and foreign exchange sales to control inflation from imported goods.
Structure du marché
Government securities are issued by the Banco de Moçambique, as the principal issuer of government debt. A few corporate entities have issued corporate debt.
Investors are mostly commercial banks. In 2010, there were 14 commercial banks. Insurance companies and investment management companies are also active in the market.
The only institutions authorized to deal in the Treasury securities market are commercial banks. Most of the Primary Dealers are commercial banks and foreign-owned (Standard Bank, Millenium Bim, BCI and Barclays).
There is only one single-broker- dealer: the “Banco Portuges de Investimento” (BPI Dealer). Other brokers are affiliated with commercial banks.
Treasury bills are issued for a term of three, six and twelve months. The bond market remains relatively small with light trading and few listings. Treasury bonds are issued with a view to repay debts of the Mozambican government.
Treasury bills are issued every Wednesday through the Central Bank. Maturities available are 91-d, 182-d and 364-days.
Treasury bonds are issued on a needs basis. Up until 2008, bonds had no defined maturity. The terms of the bonds were reviewed and have now a maturity of one year, automatically renewable and an interest rate of 8%.
Maturities for Treasury bonds range between 3 and 10 years; the Maputo Stock Exchange also counts one perpetual bond listed. Bonds pay interest semi-annually (except for one that pays every trimester).
Average time to maturity and yield to maturity
Primary and Secondary Market
Treasury securities are auctioned on a weekly basis.
All Treasury securities are listed on the Stock Exchange. Treasury bills are tradable in the secondary market by non-financial institutions.
OTC vs. Exchange traded
The ordinary sessions of exchange markets start at 9:00 am and end at 12:00 pm. Trading is held on Tuesdays, Thursdays and Fridays.
Clearing, settlement and custody
The BVM uses a web platform which allows access to the Operators Exchange Trading System via the internet. This ensures there is no dependence on computing platforms. The remote trading system put in place in 2000 is the conduct used to trade via the internet.
Members of the Clearing and Settlement of the BVM:
- Banco de Moçambique;
- Operators Exchange;
- Other financial intermediaries legally entitled to receive from the public orders for securities, custody and administration.
The legal and regulatory framework devotes an entire range of mechanisms aimed at investor protection. In the course of its activities, the BVM meets and enforces the rules and regulations. Furthermore, the BVM has developed a framework for investor support, especially for retail investors, to provide explanations related to market intervention and the exercise of their rights as stock market investors.
Effective July 2006, a new Commercial Code entered into force, replacing an outdated code that was formulated during the colonial period.
Guide d’achat des obligations
Procedure for market participation
Banks or licensed stockbrokers are able to seek authorization from the Central Bank to participate in the Treasury securities market.
The financial settlement of transactions undertaken by the Banco de Moçambique is done on the third business day (T +3 system), at 8 pm. This includes the crediting or debiting the accounts of stock exchange operators and other intermediaries and authorized intermediaries.
The withholding tax on government and corporate bonds for foreign investors is 20%.
Openness to international investors
Law on Investment, No 3/93, created in 1993 (amended in 1993 and in 1995) is the one that governs foreign and domestic investment. There is no restriction concerning foreign ownership or foreign control of companies. Foreign investors may invest in the local stock exchange market; restrictions apply only on repatriation of funds. Residents are also allowed to hold foreign currency accounts in the foreign currency.
Foreign capital and domestic capital are treated equally in most cases, but getting proposed new investments approved by the government can be time-consuming. Although much of the economy is open to foreign investment, certain sectors are subject to specific performance requirements. Bureaucracy can be burdensome, and the legal system is inefficient and antiquated. Regulations can be applied inconsistently, and the system is prone to corruption.
Restrictions on foreign exchange and profit repatriation
Exchange control regulations need prior approval for the externalization of funds affecting convertibility, other than trade transactions, which should be supported by a full set of supporting documentation. In 2008, the Mozambican parliament passed new foreign exchange legislation that ensured the liberalization of all current account transactions. This made it possible for locals to make payments abroad without having to obtain permission from the central bank. However, capital transfers restrictions are still in force are subject to authorization from the central bank. There is no tax on currency transactions and the bid/offer spread is permitted to reach maximum 2%.
The domestic currency (Metical - MZn) is not convertible, either internationally or regionally. The Banco de Moçambique provides the necessary foreign currency (USD) as part of its intervention strategy and when need be. It is important to note that the limited supply of FX reserves may result in difficulties and delays in obtaining hard currency to satisfy the repatriation of funds.
Profit repatriation is guaranteed by the same law that rules investment in Mozambique, the Law on Investment, No 3/93. Non-residents and travelers can import any amount of foreign currency against declaration. However, only foreign currency previously declared may be re-exported. Payments and transfers are subject to maximum amounts (US$ 5,000), above which they must be approved by the central bank.
On September 2013, Moody’s assigned B1 to Mozambique’s issuer default, with a stable outlook.
On July 2013, Fitch upgraded Mozambique foreign currency issuer default ratings to B+ (from B) and affirmed the local currency issuer default rating at B+. On August 2013, S&P maintained the rating on Mozambique local foreign currency debt at B.
List of Primary Dealers
The primary dealers authorised by the Banco de Moçambique are the following: