Mozambique New Metical (MZN): Definition, Historical Background, and Economic Insights

What is the Mozambique Metical (MZM/MZN)?

The Mozambique Metical (MZM) is the official currency of the Republic of Mozambique, an African nation. The term "metical" is derived from the Arabic word mithqal, which refers to a unit of weight and was historically used as a name for the gold dinar coin widely circulated across Africa until the 1800s. In 2006, Mozambique introduced a currency reform by issuing the "New Metical" (MZN), which replaced the original MZM by 2012.

As of March 2021, the exchange rate stood at approximately 1 MZN to 0.013 US dollars.

Key Highlights

• The Mozambique Metical is the official currency of Mozambique.
• Initially introduced in 1980, the metical replaced the Mozambican escudo following independence from Portugal.
• Due to persistent inflation and economic challenges, the New Metical was introduced between 2006 and 2012, phasing out the original metical.

Understanding the Mozambique Metical

The Banco de Moçambique, Mozambique's central bank, manages the issuance and regulation of the Metical. The currency has undergone two major issuances: the first in 1980 replacing the escudo at par, and the second in 2006 with the introduction of the New Metical.

The plural form of metical is meticais. The currency subdivides into 100 centavos and is symbolized as MTn or MT. Banknotes were issued in denominations of 50, 100, 500, and 1,000 meticais, while coins came in 50 centavos, 1, 2.5, 10, and 20 meticais.

Hyperinflation severely devalued the original MZM, prompting the release of high-denomination banknotes in 2003, reaching values as high as 200,000 and 500,000 meticais. By 2005, the metical had become the world's lowest-valued currency relative to the US dollar.

In response, a redenomination took place on July 1, 2006, at a ratio of 1,000 old meticais to 1 new metical. New banknotes ranging from 20 to 1,000 meticais and coins from 1 centavo to 10 meticais were introduced. This "New Metical" carried the currency code MZN. Both old and new currencies circulated concurrently until December 31, 2006, after which the old metical ceased to be legal tender. The old notes were fully withdrawn by the end of 2012.

On October 1, 2011, Banco de Moçambique launched an updated series of banknotes with enhanced anti-counterfeiting features. The obverse of each note features Samora Moisés Machel, Mozambique's first president post-independence, while the reverse showcases native wildlife including giraffes, lions, and elephants.

Between 2007 and 2017, the New Metical depreciated to record lows against the US dollar, hitting 78.45 to 1 in October 2016. This decline was partly triggered by revelations of undisclosed loans to state-owned enterprises, leading the International Monetary Fund (IMF) to suspend budgetary support.

The Economy of Mozambique

Mozambique gained independence from Portugal in 1975 after a decade-long liberation struggle. The country received backing from Cuba and the Soviet Union but was soon embroiled in a 15-year civil war that devastated its economy.

Following peace accords, Mozambique held free elections in 1993, and by 1995, over 1.7 million refugees returned from neighboring countries. Despite these advances, political instability and allegations of corruption continue to challenge national stability.

Since the 2006 currency reform, Mozambique’s economy has faced difficulties maintaining consistent growth. According to World Bank data from 2019, the nation recorded a GDP growth rate of 2.3% alongside an inflation rate of 2.8%. In commerce, the US dollar, British pound, euro, and South African rand are widely accepted alongside the metical.

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