Mozambique: Credit to economy rises for second straight month in March

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Mozambique: Credit to economy rises for second straight month in March

3:21 CAT | 23 May 2024

File photo: DW

Credit to the Mozambican economy grew in March, the second consecutive monthly increase, to 273,306 million meticais (€3,938 million), after eight months of decline, according to data compiled by Lusa this Thursday.

This represents a 0.5% growth in one month, compared to the 271,948 million meticais (€3,919 million) at the end of February, which in turn represented a growth of 0.3% over January, according to official data from the Bank of Mozambique’s most recent statistical report.

Credit to the economy granted by banks had reached a maximum of 298,182 million meticais (€4,298 million) in May 2023, but since then it had been falling, declining 2.2% from December to January alone, when it fell to 271,183 million meticais (€3,909 million).

The report also reveals that, at the end of March, the average interest rate on loan operations with maturities greater than two years stood at 23.82%.

The reference interest rate for credit operations in Mozambique fell to 22.30% earlier this month, the fourth drop in five months, the Mozambican Bank Association (AMB) announced.

Since 2018, this rate, known as ‘prime rate’, had been falling, reaching a minimum of 15.5% in February 2021, when the trend was reversed and the rate began to rise until reaching 23.50% in April last year, and then 24.10% in July.

Last January, the rate returned to the values of April 2023, falling in March to 23.10%, in April to 22.70%, and, now, in May, to 22.30%.

Increases in the ‘prime rate’ have been associated with the increase in the monetary policy interest rate (MIMO rate, which influences the formula for calculating the ‘prime rate’) by the central bank, in order to control inflation.

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

According to data from the central bank, 15 commercial banks and 12 micro-banks operate in Mozambique, as well as various credit cooperatives and savings and credit organizations.

Source: Lusa