Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

MOZAMBIQUE

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of December 31, 2006)

Status under IMF Articles of Agreement
Article XIVYes.
Exchange Measures
Restrictions and/or multiple currency practicesThe staff report for the fifth review under the Three-Year Arrangement under the Poverty Reduction and Growth Facility with the Republic of Mozambique states that as of December 4, 2006, Mozambique maintained restrictions on the making of payments and transfers for current international transactions subject to Fund approval under Article VIII as evidenced by: (i) the discretionary prior approval for remittances of family living expenses; (ii) the authorization for the purchase of foreign exchange in excess of US$5,000 for certain transactions; (iii) the prohibition for the conversion of balances of nonresidents’ domestic currency accounts into foreign currency or transfer abroad; and (iv) the need for proof of performance of a service prior to authorizing its payment. (Country Report No. 07/36)
International security restrictionsNo.
References to legal instruments and hyperlinksn.a.
Exchange Arrangement
CurrencyThe currency of Mozambique is the Mozambican metical.
Exchange rate structureUnitary.
Classification
Managed floating with no predetermined path for the exchange rateThe Bank of Mozambique (BM) discloses the average foreign exchange buying and selling rates of commercial banks in the interbank foreign exchange market (MCI) recorded online by banks using software provided by the BM. This rate is used by the BM in its foreign exchange buying and selling transactions in the MCI (including auction sales), based on the best price criterion (highest sale price and lowest purchase price). However, the BM introduced a temporary band in the interbank foreign exchange market that the authorities have committed to eliminate by end-June 2007.
The foreign exchange auctions introduced in 2005 have a spot-value date set by the software provided by the BM. The exchange rate the BM currently publishes daily (D) is an average of the exchange rates quoted by the commercial banks at the BM’s computerized rates window, as determined at 3:30 p.m. the previous day (D–1).
Commercial banks, which participate in the market, may buy and sell foreign exchange from and to individual customers at freely negotiated rates, and exchange bureaus may do the same. Negotiated transactions between the BM and commercial banks have a spot-value date (up to two business days).
Effective December 18, 2006, a new regulation (Notice No. 5 of December 2006) came into effect stipulating that commercial banks participating in the MCI must subscribe to a code of conduct and must honor up to one firm quotation of $50,000 a day. According to this regulation, the maximum spread between the foreign exchange buying and selling rates is set at the discretion of the BM. There is also an interbank money market and an interdealer market in foreign exchange (commercial banks and exchange bureaus) outside the fixing sessions.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketThe use of this market is not common.
References to legal instruments and hyperlinksNotice No. 1/GGBM/2005; Notice No. 5/GGBM/2006; www.bancomoc.mz.
Arrangements for Payments and Receipts
Prescription of currency requirementsThe metical may not be used for transactions abroad.
Controls on the use of domestic currencyControls apply to the use of domestic currency for current and capital transactions and payments.
Use of foreign exchange among residentsThe use of foreign currency by residents in domestic transactions is common, although not encouraged.
Payments arrangementsNo.
Administration of controlThe BM is responsible for foreign exchange policy and administers its control.
Payments arrears
Officialn.a.
Privaten.a.
Controls on trade in gold (coins and/or bullion)
On domestic ownership and/or tradeResidents other than monetary authorities are permitted to hold gold for numismatic purposes or as jewelry or ornaments.
On external tradeThe exportation of gold is governed by special regulations; the same regulations that apply to other import items are applicable to the importation of nonmonetary gold.
Controls on exports and imports of banknotes
On exports
Domestic currencyExports of domestic currency are subject to a limit of Mt 500.
Foreign currencyImmigrants may export foreign banknotes up to $5,000 and, above that, up to the amount they declared on entry.
On imports
Domestic currencyImports of domestic currency are subject to a limit of Mt 500, provided they had been previously exported.
Foreign currencyImports of foreign currencies in excess of $5,000 must be declared.
References to legal instruments and hyperlinksLaw 3/96; www.bancomoc.mz.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyYes.
Held abroadLegal entities must obtain prior approval from the BM to open these accounts.
Accounts in domestic currency held abroadNo.
Accounts in domestic currency convertible into foreign currencyNo.
References to legal instruments and hyperlinksLaw 3/96; www.bancomoc.mz.
Nonresident Accounts
Foreign exchange accounts permittedYes.
Domestic currency accountsThese accounts may be opened only with funds from the conversion of foreign currency or from employment and technical assistance contracts approved by the appropriate institutions.
Convertible into foreign currencyThis is permitted only for funds whose origin has been proven; prior approval is required. Transfers of such funds abroad are permitted once the origin of the funds has been proven.
Approval requiredYes.
Blocked accountsYes.
References to legal instruments and hyperlinksLaw 3/96; wwwbancomoc.mz.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for imports
Advance payment requirementsDocumentary proof of the arrival of goods must be presented.
Documentation requirements for release of foreign exchange for imports
Domiciliation requirementImport transactions must be made through a commercial bank.
Preshipment inspectionThere is a list of goods that are subject to preshipment inspection.
Letters of creditThe law favors the use of LCs and documentary remittances or collection (because they entail lower risks) without prejudice to other means widely used in international trade.
Import licenses and other nontariff measuresAll imports must be registered with customs. An import clearance (“single document” form) is required.
Negative listA negative product list exists under the current commercial code.
Open general licensesSingle licenses are issued.
Import taxes and/or tariffsSugar imports are subject to a variable surcharge.
State import monopolyNo.
References to legal instruments and hyperlinksNotice No. 6/GGBM/2005 of May 23, 2005.
Exports and Export Proceeds
Repatriation requirementsAll export proceeds, except in cases authorized by the BM, must be collected through commercial banks.
Financing requirementsNo.
Documentation requirementsExporters must present the export clearance (“single document” form), a commercial invoice, and a bill of lading.
Letters of creditThe law favors the use of checks and transfers, LCs, and documentary collection.
DomiciliationYes.
Preshipment inspectionInspection is performed only at the request of an importer.
OtherYes.
Export licensesAll exports must be registered with customs. An export clearance (“single document” form) is required.
Export taxesExports of raw cashew nuts are subject to an 18% overvaluation tax.
References to legal instruments and hyperlinksNotice No. 6/GGBM/2005.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersCommercial banks are authorized to sell foreign exchange up to $5,000 for the payment of all types of invisible transactions and current transfers, except for profits and dividends from investments. Operations exceeding the limits and those relating to profits and dividends are subject to prior approval of the BM. Exchange bureaus are authorized to sell foreign exchange up to $5,000 to individuals to pay expenses associated with travel, study, or medical treatment abroad, as well as for film rental, expenses for fairs and exhibitions, contributions to international organizations, and subscriptions to publications.
Trade-related payments
Prior approvalYes.
Quantitative limitsYes.
Investment-related paymentsRemittances of profits and dividends from foreign direct investment may be made in accordance with the specific project authorization.
Prior approvalYes.
Quantitative limitsYes.
Payments for travel
Prior approvalYes.
Quantitative limitsYes.
Personal payments
Prior approvalYes.
Quantitative limitsYes.
Foreign workers’ wagesForeign experts working in Mozambique may remit abroad all or part of their salaries, depending on the terms of their employment contracts.
Prior approvalYes.
Quantitative limitsYes.
Credit card use abroad
Quantitative limitsYes.
Indicative limits/bona fide testYes.
Other payments
Prior approvalApproval is required for payments in excess of $5,000.
Quantitative limitsYes.
References to legal instruments and hyperlinksLaw 3/96; www.bancomoc.mz.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsYes.
Surrender requirements
Surrender to the central bankCertain Mozambican nationals working abroad under officially arranged contracts (specifically, miners in South Africa) are obliged to remit 60% of their earnings through the BM and to convert them into meticais.
Restrictions on use of fundsNo.
References to legal instruments and hyperlinksPortugal–South Africa Working Agreement of October 13, 1964.
Capital Transactions
Controls on capital transactionsControls apply to all capital transactions in accordance with Law 3/96.
Repatriation requirementsNo.
Controls on capital and money market instrumentsControls apply to all these transactions.
Controls on derivatives and other instrumentsControls apply to all these transactions.
Controls on credit operationsControls apply to all credit operations and transactions in sureties, guarantees, and financial backup facilities. Public and private enterprises need BM approval to borrow abroad. All foreign borrowing must be registered with the BM. Borrowing by the government must be obtained on concessional terms.
Controls on direct investment
Outward direct investmentYes.
Inward direct investmentForeign investors are guaranteed the right to repatriate their initial capital. Incentives for foreign investments include tax and customs exemptions for specified periods and access to domestic credit. Foreign investment proposals are processed by the Investment Promotion Center. Foreign investors may remit profits and dividends from their investments.
Controls on liquidation of direct investmentYes.
Controls on real estate transactions
Purchase abroad by residentsYes.
Purchase locally by nonresidentsNonresidents are prohibited from purchasing real estate from the government.
Sale locally by nonresidentsYes.
Controls on personal capital transactions
LoansControls apply to all these transactions.
Gifts, endowments, inheritances, and legaciesControls apply to all these transactions.
Settlements of debts abroad by immigrantsYes.
Transfer of assetsControls apply to all these transactions.
Transfer of gambling and prize earningsEarnings from gambling are fully transferable, provided they are confirmed by the casinos, in accordance with a special permanent authorization granted to the casinos by the BM.
References to legal instruments and hyperlinksLaw 3/96; www.bancomoc.mz.
Provisions Specific to the Financial Sector
Provisions specific to commercial banks and other credit institutions
Borrowing abroadPrior approval is required and the borrowing must be registered at the BM.
Maintenance of accounts abroadYes.
Lending to nonresidents (financial or commercial credits)Yes.
Lending locally in foreign exchangeIn accordance with Notice No. 5/GGBM/2005, Notice No. 7/GGBM/2005 of June 6, 2005, and Notice No. 5/99 of February 26, 1999, banks must record a 50% provision on lending when there are strong doubts about repayment or when borrowers are nonexporters, and a 100% provision for overdue credits.
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsIn accordance with Notice No. 2/GBM/2004 and Notice No. 3/GGBM/2004, legal reserves should not fall below 10% at any time. In addition, banks need to hold on average 11.51% of their eligible deposits in legal reserves over a preestablished period of two weeks. This reserve requirement applies to deposits in both domestic and foreign currencies.
Liquid asset requirementsYes.
Credit controlsYes.
Investment regulations
Abroad by banksYes.
In banks by nonresidentsYes.
Open foreign exchange position limitsLimits are set as a percentage of core capital.
Provisions specific to institutional investors
Insurance companiesDecree No. 42/03 of December 10, 2003, regulates the financial guarantees required of the insurance business.
Limits (max.) on securities issued by nonresidentsn.a.
Limits (max.) on investment portfolio held abroadn.a.
Limits (min.) on investment portfolio held locallyn.a.
Currency-matching regulations on assets/liabilities compositionn.a.
Pension fundsn.r.
Investment firms and collective investment fundsDecree No. 54/99 of September 8, 1999, regulates the creation and functioning of investment funds.
Limits (max.) on securities issued by nonresidentsn.r.
Limits (max.) on investment portfolio held abroadn.r.
Limits (min.) on investment portfolio held locallyn.r.
Currency-matching regulations on assets/liabilities compositionn.r.
References to legal instruments and hyperlinksNotice No. 2/GGBM/2004; Notice No. 5/GGBM/2005; Notice No. 7/GGBM/2005; Notice No. 5/99; Notice No. 3/GGBM/2005; Decree No. 54/99 of September 8, 1999; Decree No. 42/03 of December 10, 2003.
Changes during 2006
Exchange arrangementDecember 18. A new regulation (Notice No. 5 of December 2006) went into effect stipulating that commercial banks participating in the MCI must subscribe to a code of conduct and must honor up to one firm quotation of $50,000 a day.

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