Foreign Exchange Regulations
On September 11, 2017, the Council of Ministers approved Decree No. 49/2017, which repealed the implementing regulation of the Foreign Exchange Law 11/2009 and authorized the Central Bank to undertake a review and draft new proposed regulations. The Central Bank submitted a draft of the new proposed regulations to CTA. SPEED+ worked closely with CTA to review and comment. The draft regulations:
- Are a considerable improvement over the previous Regulations;
- Remove several pointless administrative burdens both on the private sector, exporters, investors, and parts of international supply chains, as well as the Central Bank itself;
- Incentivize exporters and direct foreign investors, both to export and invest more, and to report as required a greater portion of their actual transactions.
- Reduce Central Bank control over investments that do not pose high currency risk.
- Allow greater flexibility in the flow of capital to the country (which will help control inflation).
- Allow free flow of foreign investment through commercial banks without prior approval of the Central Bank.
- Allow foreign investment in small and medium enterprise without bureaucratic constraints.
These proposed changes are designed to align the Mozambique foreign exchange control system with international best practice, and thus facilitate international trade with Mozambique and foreign direct investment into Mozambique. Mozambique's efforts to liberalize capital transactions will undoubtedly help to ameliorate challenges presented by slower global growth and subdued capital flows to emerging markets, and are a move in the right direction, particularly as Mozambique seeks to emerge from its economic crisis, attract foreign investment and benefit from its natural resources. While the revised regulations may present a challenge regarding capital flight, the benefits from increased capital inflows will likely outweigh and risks. The Central Bank also surveyed and apparently aligned the new regulations with the practices of regional countries, as given in the attached matrix of changes.