Consulting firm Fitch Solutions forecasts 8.4% growth in bank lending in Mozambique, accelerating from the 3.9% credit expansion recorded last year, and underpinned by falling interest rates.
“We see growth in bank loans in Mozambique accelerating from 3.9% in 2022 to 8.4% this year, and believe that the fall in interest rates will improve demand for bank credit this year,” write the analysts of this consultancy owned by the same owners of financial rating agency Fitch Ratings.
In its analysis of the banking sector, sent to clients and to which Lusa had access, Fitch Solutions wrote that the reduction of domestic debt by the government will give banks more room to grant more credit to individuals and private companies.
Mozambique’s central bank recently presented data on loans last year, recording growth of 3.9 percent, down from 4.9 percent in 2021.
“We attribute this mainly to the increase in the central interest rate from 18.2% in 2021 to 20.1% in 2022, which put pressure on liquidity last year, resulting in higher borrowing costs and having an impact on credit demand,” the analysts write.
For Fitch Solutions, the financial regulator should keep the key interest rate at 17.25% this year, which will bring nominal rates down, and inflation should slow from an average of 9.9% in 2022 to 8.6% in 2023.
In the analysis note, Fitch Solutions also points out that the reduction in domestic public debt issuance will increase banks’ room to lend to individuals.
“Following the difficulties in accessing external financing between 2016 and 2022 due to the 2017 Financial Default, Mozambique has regained access to financing from the International Monetary Fund and the World Bank in 2022, and the government will use a portion of the $456 million [€432 million] loan from the IMF and the $300 million [€284 million] grant from the World Bank to finance the deficit,” the note reads.
In addition, they add, “the increase in revenues from the gas sector will limit the need for the government to take on debt from Mozambican banks.”
In December 2021, the percentage of domestic debt securities in the total portfolio of banks had grown by 25.8% year-on-year, but in December 2022 this growth was only 0.4%, “a trend that will continue in 2023 and thus give banks room to direct their activities towards loans to customers as a source of income.”
For 2024, Fitch Solutions estimates 8.8% growth in credit to consumers and the private sector, underpinned by a reduction in interest rates to 16.25% and a drop in the average interest rate for loans from 19.6% this year to 16.3% in 2024.