The economic week was marked by interest rate cuts by the Bank of Mozambique, the stability of the prime rate and the challenges facing the banking system due to non-performing loans. These measures aim to stabilise the economy, boost growth and minimise financial risks.
On Monday (27), the BoM’s Monetary Policy Committee (CPMO) announced a further cut in the monetary policy interest rate, known as MIMO, reducing it from 12.75 per cent to 12.25 per cent. The central bank justified the decision by maintaining a single-digit inflation outlook, despite the increased risks associated with post-election tension, fiscal risk and climate shocks.
At the same time, the CPMO reduced the mandatory reserve coefficients, taking liabilities in national currency from 39 per cent to 29 per cent and in foreign currency from 39.50 per cent to 29.50 per cent. These measures are aimed at increasing liquidity to support the economy and restoring productive capacity.
However, the Mozambican Banking Association (AMB) announced that the reference interest rate, known as the prime rate, will remain at 19.0 per cent in February, after four consecutive monthly cuts. Since 2018, the prime rate has been falling until it reached 15.5 per cent in February 2021, but it rose again, reaching 24.1 per cent in July 2023.
In subsequent months, the rate gradually fell again, stabilising at the current 19.0%. This stability suggests a cautious adjustment by the banking system to the current economic scenario.
Bank of Mozambique
On the other hand, a report by the Bank of Mozambique revealed that more than 40% of the credit granted by Banco Nacional de Investimento (BNI) and Ecobank was in default at the end of September 2024. BNI had a default ratio of 41.09%, while Ecobank had a ratio of 43.78%, significantly above the recommended 5%.
Other institutions, such as Moza Banco and Access Bank, also have high levels of non-performing loans. In contrast, banks such as the United Bank for Africa (UBA) and Standard Bank managed to keep their ratios below the recommended limit.
The Confederation of Economic Associations (CTA) reacted to the recent cut in the MIMO rate, considering it positive but insufficient. The CTA argues that the interest rate cut should be accompanied by an increase in the availability of foreign currency on the market, since low liquidity in foreign currency can jeopardise the import process and affect business growth. In addition, the organisation advocates the creation of moratoriums for commercial banks, allowing greater flexibility in renegotiating credits with companies affected by recent economic and social events.
The CTA’s executive director, Eduardo Sengo, also warned of the impact of recent decisions by the US government, under the administration of Donald Trump, which could limit the entry of foreign currency into the national market. These decisions include the freezing of US-funded projects in Africa, directly impacting Mozambique.
Text: Felisberto Ruco
