Mozambique: Mozambican Business Calls for Cut in Interest Rate

Maputo — The Confederation of Mozambican Business Associations (CTA) has called for a sharp reduction in interest rates charged by the country's banks, reports Monday's issue of the independent newssheet "Carta de Mocambique".

In a study on the impact on Mozambican businesses of the respiratory disease Covid-19, the CTA calls for the Bank of Mozambique's monetary policy interest rate (MIMO) to be cut from the present 12.75 per cent to 6.55 per cent. The MIMO rate governs the central bank's interventions in the interbank money market, and is supposed to give a lead to the commercial banks.

The CTA argues that the current monetary policy indicators, together with the low rates of monthly and annual inflation, show that "there is considerable space for a reduction in the key interest rates without affecting the real income of savers and without significantly compromising the stability of inflation".

The CTA calls on the central bank to slash its other interest rates too. It wants the Standing Lending Facility (the interest rate paid by the commercial banks to the central bank for money borrowed on the Interbank Money Market) to fall from 15.75 per cent to 12.2 per cent, and the Standing Deposit Facility (the rate paid by the central bank to the commercial banks on money they deposit with it) to be cut from 9.75 to 3.55 per cent.

As for the rates charged by the commercial banks, the CTA wants to see the Prime Rate fall from the current 18 per cent to 11.8 per cent.

These reductions, it claims, apart from injecting liquidity into the economy, would be a pillow to help support the losses that Covid-19 could cause in the income of the financial sector, and the obligations that private companies have to the banks.

The CTA says that the sectors most affected by Covid-19 are tourism (hotels and restaurants), transport (both air and road transport), and agriculture. It claims these sectors have suffered falls in income of 95, 70 and 47 per cent respectively. The total loss in these sectors is put at 355 million US dollars.

The measures the CTA proposes for these sectors are delays in tax payments, and allowing them to suspend labour contracts and lay off staff for six months.

The CTA says it gave its study to the Minister of Industry and Trade, Carlos Mesquita, last Thursday, and the government is expected to reply to the document in the near future.

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