Circular No. 6/GBM/2017, March 30 - Uniformization of the Exchange Rate and Maximum Spread Between Foreign Currency Buy and Sell Rates

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Banco de Moçambique Governador

NOTICE NO. 6/GBM/2017

Maputo, March 30, 2017

SUBJECT: Uniformization of the exchange rate and maximum spread (spread) between foreign currency buy and sell rates

Authorized foreign exchange arbiters in Mozambique have been setting different exchange rates for the same currency pair, depending on the nature and purpose of the transaction, which creates a multiplicity of quotes, thereby compromising the transparency and credibility of exchange rates applied in the foreign exchange market.

Thus, finding it necessary to establish the principle of exchange rate uniformity to ensure greater transparency and credibility of exchange rates applied in the foreign exchange market, as well as to establish the methodological procedure for setting the maximum spread (spread) between foreign currency buy and sell rates, in order to avoid divergent interpretations and distortions in the foreign exchange market, the Bank of Mozambique, using the powers conferred upon it by paragraph a) of Article 30 of Law No. 1/92, of January 3 - Organic Law of the Bank, combined with paragraph 2 of Article 130 of Decree No. 83/2010, of December 31 - Foreign Exchange Law Regulations, determines:

Article 1 (Subject Matter)

This Notice establishes the principle of exchange rate uniformity and the maximum spread (spread) between foreign currency buy and sell rates.

Article 2 (Scope)

This Notice applies to banks and exchange houses.

Article 3 (Uniformity of exchange rates)

Banks must set uniform exchange rates in operations with the public, regardless of their nature and purpose, namely the purchase and sale of foreign currency involving banknotes, coins, foreign exchange, and other payment or receipt operations concerning the exterior.

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Banco de Moçambique Governador

Article 4 (Duty to observe the spread)

1. Institutions covered by this Notice must observe a maximum spread (spread) of 2% between their respective buy and sell exchange rates, in operations conducted with their clients.

2. For the purposes of the preceding paragraph, institutions must observe the value-based criterion for the daily weighted average cost of purchased foreign currency as set out in the Annex to this Notice.

Article 5 (Publication of the exchange rate table)

Institutions covered by this Notice must publish the exchange rate table in a visible and easily accessible location for the public.

Article 6 (Penalties)

Non-compliance with the provisions of this Notice is punishable under applicable legislation.

Article 7 (Clarification of doubts)

Doubts arising from the interpretation and application of this Notice must be submitted to the Prudential Supervision Department of the Bank of Mozambique.

Article 8 (Repeal)

Notice No. 1/GGBM/2005, of May 25, is hereby repealed, as well as any other instruments that contradict it.

Article 9 (Entry into force)

This Notice enters into force on the date of its publication.

[Signature] Rogério Lucas Zandamela Governor

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Banco de Moçambique Governador

Annex

VALUE-BASED CRITERION FOR THE WEIGHTED AVERAGE COST

1. The weighted average cost of purchasing foreign currency must be based on the buy exchange rates and the amount of foreign currency acquired in each transaction, applying the following formulas:

$$PC = P1 * Q1 + P2 * Q2 + P3 * Q3 + \dots + Pn * Qn / \sum_{i=1}^{n} Qn$$

$$PV = PC (1 + S)$$

2. For the purposes of the formulas indicated in the preceding paragraph:

a) $P1, P2, P3, \dots, Pn$ : are the different acquisition prices of foreign currency; b) $Q1, Q2, Q3, \dots, Qn$ : are the quantities acquired; c) $PC$ : is the weighted average cost of purchasing foreign currency; d) $PV$ : is the selling price of foreign currency; and e) $S$ : is the maximum spread (spread) applied to the purchase and sale of foreign currency.