Mozambique: Credit to the economy drops in October, first time in six months

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Mozambique: Credit to the economy drops in October, first time in six months

3:56 CAT | 16 Dec 2024

FILE - For illustration purposes only. [File photo: Banco de Moçambique]

Bank credit in the Mozambican economy grew in every month of 2024, with the exception of April, when it fell by around 1% to 270,676 million meticais (€4,033 million), recovering consecutive monthly growth since May before returning to declines in October.

Credit to individuals continues to lead, but suffered its first drop in ten months in October, to almost 96,745 million meticais (€1,441 million) after consecutive monthly highs.

Next comes the transport and communications sector, where total credit granted by banks fell slightly again, to 25.935 billion meticais (€386 million); trade, with almost 24.612 billion meticais (€366.7 million); and the manufacturing industry, which grew to 23.364 billion meticais (€348.1 million).

The reference interest rate for credit in Mozambique fell in December by a further 0.1 percentage point to 19.7%, the ninth monthly cut in 2024, the Mozambican Banking Association (AMB) announced at the beginning of the month.

The rate, known as the prime rate, had been falling since 2018, reaching a low of 15.5% in February 2021, when the trend reversed and the rate began to rise until reaching 24.1% in July 2023.

The rate returned to its April 2023 levels (23.5%) in January 2024, after six consecutive months at highs of 24.1%. It then fell in March to 23.1%, in April to 22.7%, in May to 22.3%, in June to 22%, in July to 21.2%, a value that remained in August and September, falling in October to 20.5%, in November to 19.8% and in December to 19.7%.

The fluctuations in the prime rate are associated with the monetary policy interest rate (MIMO rate, which influences the formula for calculating the prime rate) set by the central bank to control inflation.

READ: Mozambique: Credit to the economy hit one-year-high in September

The Bank of Mozambique’s Monetary Policy Committee (CPMO) announced at the end of November a further reduction in the monetary policy interest rate, known as MIMO, from 13.5%, in force since the end of September, to 12.75%.

“This decision is supported by the continued consolidation of the inflation outlook in single digits in the medium term, despite the uncertainties regarding the duration of the post-election tension and its impact on the prices of goods and services,” the central bank explained in a statement after the bi-monthly CPMO meeting.

The reference interest rate had been set at 17.25% since September 2022, following the intervention of the central bank, which then began consecutive cuts from 31 January, when it was reduced to 16.5%. On March 27, it was cut to 15.75%, on May 27, to 15%, on July 31, to 14.25% and on September 30, to 13.5%.

The next meeting of the Monetary Policy Committee is scheduled for January 27 next year.

Source: Lusa