Mozambique: Credit to economy continues recent recovery, up 2.5% in May MoM

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Mozambique: Credit to economy continues recent recovery, up 2.5% in May MoM

11:55 CAT | 16 Jul 2024

File photo: O País

Credit to Mozambique’s economy in May totalled 277.212 billion (€4.004 billion), the highest figure since the beginning of the year, according to official data compiled on Tuesday by Lusa.

This performance represents an increase of 2.5% compared to the volume of credit to the economy granted by Mozambique’s banks in April – which until March fell for eight consecutive months – which then totalled 270.676 billion meticais (€3.910 billion), according to official data from the Bank of Mozambique’s most recent statistical report.

Credit to the economy granted by the banks in May 2023 peaked at 298.182 billion meticais (€4.307 billion), but since then it has been falling, with a month-on-month drop of 2.2% of January alone, when it fell to 271.183 billion (€3.917 billion).

Loans to individuals continue to lead and have been growing since the beginning of the year, to almost 91.240 billion meticais (€1.318 billion) in May, followed by transport and communications, with 26.878 billion meticais (€388 million), and trade, with 24.509 billion meticais (€354 million).

The same report states that at the end of May the average interest rate on new loan operations for companies rose to 23.83%, reaching 24.92% for consumption and 23.33% for housing, while the key rate was 22.30% in the same period.

Meanwhile, the reference interest rate for credit operations in Mozambique, known as the prime rate, fell this month to 21.20%, the fifth drop in six months, the Mozambican Banking Association (AMB) announced earlier.

This rate had been falling since 2018, to a minimum of 15.5% in February 2021, when the trend reversed and the rate began to rise until it reached 23.50% in April last year, and then 24.10% in July.

In January, the rate returned to the values of April 2023, maintaining its downward trajectory in the following months.

The increases in the prime rate have been associated with the central bank raising its monetary policy interest rate (MIMO rate, which influences the formula for calculating the prime rate) in order to control inflation.

At the end of March, the Monetary Policy Committee of the Bank of Mozambique decided to once again lower the MIMO, to 15.75%, taking into account the “consolidation of the inflation outlook in single digits in the medium term, in a context where the assessment of risks and uncertainties associated with the projections remains favourable.”

According to data from the central bank, 15 commercial banks and 12 microbanks operate in Mozambique, as well as credit cooperatives and savings and credit organisations, among others.

Source: Lusa