Mozambique: Interest rate cut will boost investment, lower costs – businesses

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Mozambique: Interest rate cut will boost investment, lower costs – businesses

4:13 CAT | 05 Aug 2025

File photo: Banco de Moçambique

The Confederation of Economic Associations of Mozambique (CTA) said on Tuesday that the recent cut in interest rates to 10.25%, decided by the central bank, will reduce costs for entrepreneurs and “boost investment” in the country.

“This is an important measure to facilitate access to finance, reduce credit costs and boost productive investment, with particularly positive effects for new borrowers, as well as for those who have some room for negotiation on existing loans,” said a statement from Mozambique’s largest business confederation.

In the statement, the CTA acknowledges several recent initiatives, including those by the government, “as unequivocal signs of confidence and encouragement for the private sector as the main driver of the domestic economy,” and encourages the executive to “continue with greater speed and determination to implement structural reforms,” as well as to “create financial, fiscal and legal incentives.”

This, it adds, is so that they can consolidate the country “as a preferred destination for domestic and foreign private investment, especially in sectors with the greatest potential for transformation”, such as agriculture, industry, energy, tourism, logistics and information and communication technologies.

The Monetary Policy Committee (CPMO) of the Bank of Mozambique cut the MIMO monetary policy interest rate for the ninth consecutive time, by 75 basis points, to 10.25%, Governor Rogério Zandamela announced on Thursday.

“This measure stems mainly from the continued consolidation of the outlook for single-digit inflation in the medium term, reflecting in part the favourable trend in international commodity prices, despite the persistence of domestic risks and uncertainties associated with the projections,” the governor said at a press conference in Maputo at the end of the MPC meeting, which is held every two months.

The key interest rate in Mozambique had been set at 17.25% since September 2022, following intervention by the central bank, which then began consecutive cuts from 31 January 2024, when it reduced it to 16.5%. In March last year, the Bank of Mozambique cut it to 15.75%, in May to 15%, in July to 14.25%, in September to 13.5%, in November to 12.75%, on 27 January this year to 12.25% and in March to 11.75%, followed by a further cut on 30 May to 11% and now to 10.25%.

Zandamela added that, in the medium term, ‘a gradual recovery of economic activity is expected’ in Mozambique, excluding the production of Liquefied Natural Gas, “favoured, in part, by the reduction in interest rates and the prospects for the implementation of projects in strategic areas”.

According to the statement made by Rogério Zandamela, “the risks and uncertainties associated with inflation projections remain high” and “the impacts of the worsening situation on the state budget, uncertainties regarding the speed of the restoration of productive capacity and the supply of goods and services, and the effects of climate shocks” stand out as “likely factors for an increase in inflation in the medium term”.

“The CPMO will continue with the process of normalising the MIMO rate in the medium term. The pace and magnitude will continue to depend on the inflation outlook, as well as the assessment of the risks and uncertainties underlying the medium-term projections,” he added.

Source: Lusa