The African Development Bank (AfDB) has warned of the significant concentration of credit in Maputo province, where approximately 70 per cent of financing has been allocated. In contrast, several provinces in the interior received, on average, less than 1% of the available credit.
This unequal distribution represents considerable challenges for the government’s financial inclusion strategy. The information was highlighted by the Bank of Mozambique and detailed in the AfDB’s recent report entitled “Country Focus Report 2024: Mozambique Driving Transformation”.
According to the report, although a restrictive monetary policy has helped to stabilise prices and strengthen international reserves, “the lack of credit continues to restrict activities in the non-extractive sectors, such as manufacturing and agriculture. The manufacturing sector’s share of credit to the economy is falling, from 14 per cent in December 2022 to 9 per cent in 2023, while agriculture’s share fell from 2 per cent to 1.4 per cent in the same period.”
The report also reveals that inflation has been estimated at 7.1 per cent in 2023, down from 10.3 per cent the previous year. The Interbank Money Market Rate (MIMO) was set at 17.25 per cent, having been reduced by the Bank of Mozambique by 150 basis points to 15.75 per cent at the start of 2024, in an attempt to ease credit restrictions.
The AfDB emphasises that “structural barriers, rather than macroeconomic ones, are mainly responsible for the lack of liquidity, especially in the business sector. Regional disparities in access to credit highlight the need for policies that promote more equitable and inclusive economic development”.
The AfDB report reveals that tighter international financial conditions have significantly impacted Mozambique, particularly in the non-extractive sector. “The increase in the cost of credit has affected these companies, while those involved in megaprojects, which have credit lines with foreign banks, have suffered less impact. The country’s fluctuating exchange rate has posed a challenge, forcing the government to use the key rate as the main instrument to face the stricter international conditions,” reads the document.
“The lack of credit continues to restrict activities in the non-extractive sectors, such as manufacturing and agriculture.The share of the manufacturing sector in credit to the economy is decreasing, from 14 per cent in December 2022 to 9 per cent in 2023, while that of agriculture fell from 2 per cent to 1.4 per cent in the same period.”
According to the AfDB, these conditions cause subsequent effects that manifest themselves in inflation, the relative exchange rate and a reduction in government revenues. “Rising input costs create difficulties for exports of non-extractive products, forcing the government to adjust its social spending, with negative consequences for welfare,” the report revealed.
In addition to credit issues, the report addresses fiscal policy and public debt, indicating that the fiscal deficit in 2023 was -2.8 per cent of GDP, with a forecast reduction to -1.3 per cent of GDP in 2025. Mozambique remains at high risk of debt overload, with a high public debt of 91.6 per cent of GDP in 2023.
The AfDB emphasises that financial inclusion and equitable access to credit are crucial for poverty eradication and sustainable development in the country. “Continuous reforms are essential to tackle these inequalities and promote more inclusive economic growth in Mozambique,” the document concludes.
This report is part of a wider set of 54 Country Focus Reports published by the African Development Bank. The documents assess the experience of countries in accessing finance for structural transformation and highlight the shortcomings of the current global financial system.
The recommendations cover five main areas: leveraging private sector finance, increasing climate finance, reforming multilateral development banks, reviewing debt resolution mechanisms and improving domestic resource mobilisation. These proposals aim to correct structural flaws and offer practical guidelines for more equitable and sustainable development.
