20 June 2018

Mozambique: Employers Protest At High Interest Rates

Maputo — The Confederation of Mozambican Business Associations (CTA), which represents the country's employers, has protested at the high interest rates practiced by the commercial banks.

During a meeting in Maputo on Tuesday between the CTA and the Bank of Mozambique to discuss the monetary policy measures taken by the central bank, the CTA accused the commercial banks of failing to follow the lead given by the Bank of Mozambique in reducing interest rates. The CTA points out that, since April 2017 the central bank has cut its benchmark interest rate by 600 base points, but the rates charged by the commercial banks have only fallen by 300 base points.

"This is what worries the CTA today", said the chairperson of the CTA's financial policy portfolio, Luis Magaco. "There's a positive reaction from the central bank, but then there is a much slower reaction from the commercial banks".

Magaco said it was fundamental that the commercial banks should reduce their interest rates at the same pace as the central bank.

"We shall continue interacting with the Mozambican Association of Banks so that relaxing the belts of the banks, also means relaxing the belts of companies and citizens with regard to their loans", he declared.

Magaco also criticised the government and the Bank of Mozambique for an alleged "lack of policies" for stimulating the economy. Although the central bank has instruments that can control inflation and interest and exchange rates, these have been ineffective in encouraging economic growth.

"It's only possible to grow if the central bank promotes policies of economic stimulus", he argued. "But economic stimulus is really very slow, and we feel that few economic policy measures have been taken to simulate and revive the economy".

Magaco praised the Bank of Mozambique for its flexibility in matters such as exchange rate management, and suggested this was something that should be followed by the Ministry of Economy and Finance, the Ministry of Agriculture and other state bodies.

Felisberto Navalha, a member of the Bank of Mozambique's Board of Directors, told the meeting that the central bank is working with the commercial banks to improve transparency in the fixing of interest rates and "to create a situation where monetary policy decisions are transmitted much more quickly".

He noted that when the Bank of Mozambique increases its interest rate "the commercial banks react immediately and in the same direction, but when the rates fall, the banks do not react with the same speed".

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