Banks in Mozambique have become dependent on the state for growth – BMI

Login

Register

http://www.clubofmozambique.com/

Banks in Mozambique have become dependent on the state for growth – BMI

11:30 CAT | 19 Sep 2017

DW (File photo)

The BMI Research consultant said yesterday that, in the economic environment created by the state’s financial default in 2016, Mozambique’s banking sector had become dependent on public sector loans to maintain growth

“Despite the growth of loans to customers likely to continue to perform negatively in the coming months, the banking sector will find some support from a government that has few alternative sources of credit,” the analysts write in a note on the financial sector to which Lusa has access.

This Fitch consultant adds that this is because “the Mozambican government has increasingly been sidelined in international debt markets following the disclosure of hidden debts”, and “with limited recourse to external financing, the government has increasingly relied on domestic banks for credit, but we do not believe this is a sustainable growth model for banks,” the analysts write.

According to BMI Research, bank bond market growth was 19.1 percent on average in the first half of this year against the first six months of last year, compared to an expansion of only 4.1 percent in credit granted in the same period.

This model is not sustainable beyond next year, they say, and “the government will take a slow road to a new agreement with the International Monetary Fund in the coming quarters”, involving “restrictions in state loans”.

As the IMF lends at lower interest rates than commercial banks, BMI believes that “concessional loans will gradually replace Mozambique’s banking sector as the government’s main creditor”.

Source: Lusa / Dinheiro Vivo