Credit to Mozambique’s economy falls again in April

According to data collected this Wednesday by Lusa, credit to the Mozambican economy fell in April to 270.676 million meticais (3.915 million euros) after two consecutive months of growth.

The fall in April almost wiped out a 0.5% gain in March, which followed a 0.3% increase in February after eight months of decline, according to official data from the Bank of Mozambique’s latest statistical report.

Credit to the economy provided by banks peaked at 298,182 million metice (4,314 million euros) in May 2023, but has been falling since then, accumulating a decline of 2.2% from December to January alone, when it fell to 271,183 million metice (3,922 million euros).

Lending to individuals continues to lead the way and in April 2024 recorded its fourth consecutive monthly increase, reaching almost 90,047 million meticais (€1,302 million), followed by transport and communications with 25,726 million meticais (€372 million) and trade with 23,629 million meticais (€342 million), but both figures are down compared to March.

The same report said that at the end of April, the average interest rate on new business loans was 22.19%, reaching 24.69% for consumption and 23.16% for housing, while the policy rate was 22.70% over the same period.

Mozambique’s benchmark lending rate fell to 21.20% this month, the fifth cut in six months, the Association of Banks of Mozambique (AMB) announced earlier.

Since 2018, this rate, known as the “prime rate”, has been falling, reaching a low 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 last year, the rate returned to the values ​​of April 2023, maintaining a downward trend in the following months.

The increase in the “base rate” was associated with an increase in the monetary policy interest rate (MIMO rate, which influences the formula for calculating the “base 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 cut the monetary policy interest rate, known as MIMO, to 15.75%, taking into account “the consolidation of the inflation outlook in single digits over the medium term, in a context in which the assessment of risks and uncertainties surrounding the outlook remains favourable.”

According to the central bank, there are 15 commercial banks and 12 microbanks operating in Mozambique, as well as credit cooperatives, savings and loan institutions and others.