Covid-19: Absa Bank Mozambique calls for financing to support economy

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Covid-19: Absa Bank Mozambique calls for financing to support economy

2:55 CAT | 15 May 2020

File photo: Lusa

Absa Bank Mozambique considers creating credit lines to support the economy a priority in the face of the Covid-19 pandemic, in addition to the measures already implemented by the central bank.

The measures already announced by the Bank of Mozambique “may be insufficient to support the sectors most affected by the pandemic and in need of additional liquidity, or to promote investment in new opportunities”, says Bernardo Aparício, a member of the bank’s executive committee and Head of Corporate and Investment Banking at ABSA Bank Mozambique.

The idea was presented in response to the proposition posed by Lusa: “After the debt crisis and the cyclones, 2020 was expected to be the year of recovery and the launching pad for a performance similar to the first half of the past decade.” But the scenario has changed.

At this point, banks “will tend to reduce their risk to protect their capital, taking into account that losses will increase” Aparício adds, alluding to the first quarter results of global banks.

At a regional and global level, “governments are providing guarantees to banks” for credit to the economy or certain areas of it, “similar to what is already happening for some sectors in Mozambique”.

Another priority is to reduce import and export bureaucracy “to increase the efficiency of Mozambican companies and safeguard their employees”, he says.

Aparício also advises “channelling international aid to promote domestic consumption”, for example by “public investment or income distribution to families”, taking into account the “key sectors of the economy and with priority for local products and services”.

Since March, the Mozambican government and Bank of Mozambique have announced a series of measures aimed at minimising the impact of the Covid-19 pandemic, including relaxation of some banking obligations and operating conditions, which has already reduced some fees to customers.

Commercial banks can renegotiate the loan terms of customers affected by the pandemic at no additional cost, and a US$500 million (€462 million) financing line has been created to support bank customers importing goods and raw materials.

The Mozambican government also approved, this week, VAT exemption for sugar, cooking oil and soap.

The Confederation of Economic Associations of Mozambique (CTA), the country’s main employers’ association, has called for more measures, including easing of electricity and water tariffs.

ABSA Bank (former Barclays) is the fourth-largest in Mozambique in terms of market share, accounted for by total assets and deposits and according to the most recent ranking based on data from 2018 and published at the end of 2019 by consultancy KPMG and the Mozambican Bank Association.

Mozambique has an accumulated total of 115 cases of infection with the new coronavirus, with no deaths and 42 recovered.

The country has been in a state of emergency since April 1st and until the end of May, with spaces for amusement and leisure closed, prohibition of all types of events and agglomerations, recommending the population to stay at home, if they have no reason to go out, uch as work or other essentials to deal with.

During the same period, there is a limited capacity for public transport with mandatory use of masks, schools are closed and the issuance of visas to enter the country is suspended.

Source: Lusa