After the floods, businesses tried to force down real wages, a tactic which blew up in their faces when the trade unions threatened a general strike. The resurgence of urban crime contributed to a climate of increased fear, and the announcement of huge losses made by the two privatised commercial banks, the BCM and Banco Austral, did nothing to raise confidence in the financial system. In the opinion of the central bank source, this deteriorating climate had made businessmen nervous, and so they were rapidly converting their meticais into hard currency, much of which has doubtless been exported. This has a snowball effect. If the metical is seen to be weak now, then it is likely to weaken still further, and no end to the slide is in sight.
Devaluation has a serious impact on wages.
But when the figures are converted into dollars, it can be argued that real wages have fallen. When the statutory minimum wage was fixed at 568,980 meticais a month in July 2000, that was worth about 37 dollars. This month's rise brings the minimum wage up to 665,706 meticais a month - which is only 33.3 dollars. Because of Mozambique's high dependence on imports, devaluation inevitably fuels inflation, which in turn is likely to lead to increased labour discontent and pressure for a further rise in the minimum wage before the end of this year.