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CTA: Lower Interest Rates in Mozambique “Welcome” But “Still Not Enough”

CTA: Lower Interest Rates in Mozambique “Welcome” But “Still Not Enough”

The president of the Confederation of Economic Associations (CTA), Agostinho Vuma, on Friday 2 February welcomed the courage of the Bank of Mozambique (BdM) for lowering the key interest rate to 16.50%, but considered that “this action is still insufficient for the needs of entrepreneurs”.

“The CTA has advocated an interest rate below one digit, because it will allow the productive sector to have room to make investments,” he said, explaining: “if we look at the credit portfolio, which is around 250 billion meticais, this rate reduction may only have a potential impact of 5%, and we obviously want more.”

On Wednesday (31), the Monetary Policy Committee (CPMO) of the Bank of Mozambique (BdM) decided to lower the monetary policy interest rate (MIMO rate) from 17.25%, in force since September 2022, to 16.50%.

“This decision is underpinned by the consolidation of the prospects for maintaining inflation in single digits in the medium term, in a context where the assessment of the risks and uncertainties associated with inflation projections is more favourable,” the central bank said after the CPMO meeting.

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Economist João Mosca prefers to talk about “the slowdown” that has been taking place in production in Mozambique and “for various reasons, but with a very significant weight the issue of kidnappings”, he points out, adding that “there was room for a more significant reduction, but this didn’t happen because of the Bank of Mozambique’s policy that requires commercial banks to deposit almost 40 per cent of their deposits with the Central Bank”.

Pedro Cossa, president of AMECON, the Mozambican Association of Economists, says that it is “fundamental to know how to manage expectations regarding this decision by the Central Bank, because, he emphasised, ordinary people won’t feel its effect,” in statements reproduced by the VOA portal.

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