Tables of Modern Monetary Systems by Kurt Schuler ( Return to home page )


Mozambique

Political sketch

Formerly Portuguese East Africa. Independent from Portugal on 25 June 1975.

The Portuguese explorer Vasco da Gama landed on Mozambique Island in 1498, and by 1507 the Portuguese occupied it. Portuguese control spread slowly. The first colonial governor was appointed in 1752. The slave trade was an important part of Mozambique's economy. The Portuguese oceanic slave trade effectively stopped in 1839 when the United Kingdom began a policy of seizing Portuguese slave ships, and Portugal outlawed slavery in its colonies in 1869. To control Mozambique with a minimum of expense, in the late 1800s Portugal chartered private companies to administer portions of the inland territory. From 1929 to 1940 Portugal took over administration of the company territories. The seat of administration was moved from Mozambique Island to Lourenço Marques (now Maputo) in 1907. During the First World War, Mozambique was the site of fighting between German troops from neighboring Tanganyika (now Tanzania) and Portuguese, British, and South African troops opposing them. Portugal's Colonial Act of 1930 replaced limited autonomy with centralized administration from Portugal. In 1951 Mozambique became an overseas province of Portugal. The independence movement began in the early 1960s with the establishment of the Front for the Liberation of Mozambique (whose Portuguese acronym was FRELIMO). Fighting erupted between FRELIMO forces and Portuguese troops on 25 September 1964. Portugese forces withdrew from Mozambique and other colonies in 1975, following a coup of democratically minded leftist military personnel against the Portuguese dictatorship in April 1974.

Mozambique became independent on 25 June 1975. The first president, Samora Machel, died in office on 19 October 1986; his successor, Jaoquim Chissano, announced he would not run in the elections of late 2004. The FRELIMO government established a centrally planned economy. Rebel groups, especially Mozambican National Resistance (Portuguese acronym RENAMO), disrupted the economy and caused tens of thousands of deaths. RENAMO was supported by South Africa's white minority government, which viewed the presence of a black majority socialist regime at its border as a threat. In 1989 FRELIMO abandoned Marxism-Leninism as doctrine and in 1990 it took steps toward a market economy. A new, multiparty constitution was introduced late in November 1990, and on 4 October 1992 FRELIMO and RENAMO leaders signed a peace accord. The first democratic elections were held in October 1994. Most Mozambicans are subsistence farmers. The main exports are aluminum, agricultural products, and electricity (generated at dams and sold to South Africa).

Wars since 1500

Portuguese Conquest of Mozambique, 1890s; First World War in East Africa, 1914-1918 (Germany against United Kingdom, France, Belgium, Portugal); Mozambican War of Independence 1962-1974 (against Portugal); Mozambican Civil and Guerilla Wars of 1976-1992.

Convertibility

Portugal introduced exchange controls on 24 September 1914 and revoked them on 18 October 1937. There were also a few controls from perhaps 1939 to 1947. Controls were intensified in the summer of 1947, made extensive on 9 February 1948, and removed on 1 January 1993, long after Portugal had ceased to have any colonies except the Chinese city of Macau.

The escudo, introduced in Portugal in 1911 and in its African colonies in 1914, was a chronically weak currency until the currency reform of 1928. During this period, the currencies of Angola and Mozambique frequently traded at a discount to the Portuguese escudo. The Banco Nacional Ultramarino, Portugal's private monopoly note-issuer for its colonies, was not required to keep its colonial currencies at par with the Portuguese escudo, though its revised charter of 31 November 1901 did require it to accept notes of one branch at any other branch at a discount of no more than 2%, except regarding Mozambique. (The bank did not issue notes in Portugal.) Transfers of funds to Lisbon became difficult and expensive. The Banco Nacional Ultramarino's issues in Mozambique denominated in pounds sterling also became inconvertible starting in early 1921, when the government permitted the bank to suspend convertibility.

Portugal imposed exchange controls on Angola in 1931 and Mozambique in 1932. Exchange controls applied to transfers to Portugal and its colonies as well as to other countries. Earners of foreign exchange had to relinquish a high share of earnings to locally managed foreign-currency funds and accept local currency instead. The funds rationed foreign exchange for imports according to a list of priorities. In 1948 the separate colonial foreign-currency funds were centralized in Lisbon. The currency reform of 1953 unified the Portuguese escudo and the currencies of the Portuguese colonies, making them a true currency area similar to the sterling area or the French franc zone (Portugal, law of 27 June 1953). A Monetary Fund of the Escudo Zone was established by Portugal, Decree-Law 44/703 of 17 November 1962 (reprinted in Banco de Portugal annual report 1962: 129-40). On 21 February 1963 Portugal issued a ministerial decree liberalizing capital m ovements in the escudo zone (IMF ARER 1963: 313). On 1 March 1963 measures were taken to organize a new payments system for the zone (IMF ARER 1964: 390). However, Angola and Mozambique were persistently in deficit to the fund. The result was that high-priority payments were settled immediately at 1 overseas escudo = 1 Portuguese escudo, while low-priority payments experienced delays, which were a form of rationing, until the funds were available to settle them at the official rate. Exchange controls on private transfers from overseas territories to Portugal were imposed by Portugal, Decree-Law 478/71 of 6 November 1971 (reprinted in Banco de Portugal annual report 1971, v. 2: 55-67).

Other

Defaults on or restructurings of debt to the private sector (mainly from Purcell and Kaufman 1993 and Standard & Poor's 2004): 1980 (foreign currency bank debt), 1983-1992 (foreign currency bank debt, oil and interest rate shocks).

Banking crises (data since 1970s mainly from Caprio and Klingebiel 1999 and Frydl 1999): The main commercial bank experienced solvency problems in the period 1987-1995; they became apparent after 1992 and continued to 1995.

Frankel and Rose (1996) list of currency crashes: Mozambique not included.

No exchange rate data in Reinhart and Rogoff (2003).

References

Primary sources:

--Laws and decrees:

Mozambique. Gazette. 1854-present. Boletim oficial de Moçambique (1854-1860); Boletim official do Governo Geral da Provincia de Moçambique (1860-1911); Boletim official da Provincia de Moçambique (1911-1926); Boletim oficial da Colónia de Moçambique (1926-1951); Boletim oficial de Moçambique (1951-1975); Boletim da Républica: publicação oficial da Républica Popular de Moçambique (1976-present). Lourenço Marques/Maputo (name changed 1976): Imprensa Nacional (1854?-1951); Imprensa Nacional de Moçambique (1951-present).

Portugal. Gazette. 1715-present. Diário do governo (1715-1974); Diário da república (1974-present). Lisbon. Recent issues are online at <http://dre.pt/>.

--Publications of monetary authorities:

Banco de Moçambique. Annual report. 1986?-present. Relatório, balanço e contas do exercíio de 1986 e análise sobre a evoluçao do economia de Moçambique em 1986 (1986); Relatório anual (1992-present; English version Annual Report). Maputo: Banco de Moçambique. (There may be gaps before 1992, and it is unclear whether the central bank published any statements in its early years.)

Banco de Moçambique. Bulletin. 2001-present. Boletim mensual de conjuntura. Maputo: Banco de Moçambique.

Banco Nacional Ultramarino. Annual report. 1865-1999. Relatório do Banco Nacional Ultramarino. Lisbon: Banco Nacional Ultramarino. In English as Annual Report, 1973-1999? Lisbon: Banco Nacional Ultramarino. From 1920-1960 a separate volume appeared, entitled Relatório do Governo do Banco, parecer do Conselho Fiscal, balanço e contas referentes ao exercício de ....

--Web site of the current monetary authority (viewed 20 September 2005):

<http://www.bancomoc.mz>, especially "Cronologia" file.

--Other publications or Web sites:

None.

Main secondary sources:

Banco Nacional Ultramarino. Serviço de Documentação, Arquivo e Biblioteca. 1977. Papel-moeda para Moçambique, 1877/1973. Lisbon: Banco Nacional Ultramarino, Serviço de Documentação, Arquivo e Biblioteca.

Clarence-Smith, [W.] Gervase. 1985. The Third Portuguese Empire, 1825-1975: A Study in Imperialism. Manchester: Manchester University Press.

Crossley, [Sir] Julian [Stanley], and John Blandford. 1975. The DCO Story: A History of Banking in Many Countries 1925-71. London: Barclays Bank International. (Concerns Barclays Bank Dominion, Colonial and Overseas and its ancestors.)

IMF ARER. 1950-present. International Monetary Fund. Annual Report on Exchange Restrictions (1950-1978), Annual Report on Exchange Arrangements and Exchange Restrictions (1979-1988), Exchange Arrangements and Exchange Restrictions: Annual Report (1989-present). Washington: International Monetary Fund. (Contains information on IMF member countries and some of their dependencies.)

World Currency Yearbook. 1984-1990/93. Brooklyn, New York: International Currency Analysis. Previously called Pick's Currency Yearbook (1955-1979) and Pick's World Currency Report (1980-84). New York: Pick Publishing Corporation.

Wuyts, Marc Eric. 1989. Money and Planning for Socialist Transition: The Mozambican Experience. Aldershot, England: Gower.

Monetary authorities: Mozambique

Exchange rate arrangements: Mozambique