The economic week brought news that reflects the delicate balance between the mobilisation of financial resources, credit management, monetary dynamics and medium-term challenges related to inflation.
Resource Mobilisation in the Financial Market
One of the highlights of the week was the placement of Treasury Bonds by the State, which mobilised 3 billion meticals (46.5 million dollars) in an internal issue with a maturity of five years. This operation, carried out through the Mozambique Stock Exchange (BVM), marked the first reopening of the 13th series of 2024 and registered demand equivalent to 76.6 per cent of the total supply available.
With a nominal interest rate of 13.5 per cent on the first four six-monthly payments, the issue comes in the context of a growing domestic public debt, which has already reached 402.7 billion meticals (6.2 billion dollars), according to the Bank of Mozambique (BoM). This scenario illustrates the state’s efforts to balance its finances, while at the same time facing challenges related to debt sustainability.
Increase in Money in Circulation
As the state intensifies its mobilisation of resources, the Bank of Mozambique reported an increase in physical money in circulation in the country, which reached 67.4 billion meticals (one billion dollars) in October. This growth, which has been occurring for six consecutive months, demonstrates a greater demand for liquidity, driven by the economic recovery and the management of the money supply.
The central bank also introduced a new series of metical notes and coins this year, called ‘Série 2024’, which continues to honour the country’s cultural and historical heritage. This initiative reflects the commitment to modernise the monetary system, ensuring greater security and functionality in transactions.
Dynamics of Credit to the Economy
In the credit segment, the Bank of Mozambique revealed that loans granted by banks to the economy fell slightly in October to 289.3 billion meticals (4.4 billion dollars). This fall represents the first drop after consecutive months of growth, affecting above all loans to private individuals, which fell to 96.7 billion meticals (1.5 billion dollars).
Despite this one-off reduction, strategic sectors such as the manufacturing industry maintained positive trajectories, reinforcing their importance in the context of economic diversification. On the other hand, the prime rate for credit fell to 19.7%, signalling a gradual easing in the cost of financing, sustained by the reduction in the MIMO rate to 12.75%.
Inflation and Growth Prospects
Against a backdrop of economic recovery, new challenges are emerging. Oxford Economics forecasts an increase in inflation from 3.1 per cent in 2024 to 5.4 per cent in 2025, driven by the effects of El Niño, post-election tensions and an increase in capital expenditure. This scenario of inflationary pressure contrasts with the recent period of stability, when year-on-year inflation stood at 2.68 per cent in October and 3.14 per cent in the December projections.
At the same time, post-election political and economic instability has put pressure on the supply chain, hampering the supply of goods and services and directly impacting consumer prices. In addition, Oxford Economics revised downwards Mozambique’s economic growth forecasts for 2024-25, pointing to GDP expansion of 3.9 per cent and 3.2 per cent respectively.
Text: Felisberto Ruco
