Business sector faces challenges aggravated by flood– CTA

Maputo, 4 (AIM) – Mozambique’s Confederation of Business Associations (CTA) believes that the Bank of Mozambique’s decision to cut its benchmark interest rate from 9.5 to 9.25 per cent is positive, although “there are still profound challenges faced by the business sector, resulting from the economic shocks of recent years, aggravated by the impact of the floods.”

The Monetary Policy Committee of the Bank of Mozambique (CPMO) said the decision for only a small cut in interest rates was the result of “persistent inflationary risks, a slowdown in economic activity, and the severe impacts of climate shocks on the national economy.”

In a statement, the CTA claims that the challenges faced by the business sector, resulting from the impacts of the floods, also affected infrastructures, supply chains, and the productive capacity of many companies.

“To maximize the positive effects of monetary policy on the real conomy, the CTA believes that the reduction in the interest rate should be accompanied by more active interventions in the Interbank Foreign Exchange Market, through increased foreign exchange injections, in order to alleviate exchange rate pressure, reduce import costs and create a more stable environment for business planning”, reads the CTA note.

The combination of these measures, according to the document, would significantly strengthen the impact of monetary policy on the productive sector, at a moment when the “domestic public debt continues worsening, exerting pressure on the national financial market.”

According to Data from the Bank of Mozambique, domestic public debt, excluding loan and lease agreements and overdue liabilities, stands at 485 billion Meticais (7.5 billion US dollars, at the current exchange rate), representing an increase of one billion Meticais compared to December 2025.

“Public debt limits the Central Bank’s ability to channel resources to the private sector, particularly affecting micro, small and medium-sized enterprises, which depend on bank credit to grow, innovate and generate employment”, reads the note.

“There is a need for more balanced and coordinated macroeconomic policies that promote greater availability of credit to the private sector, more competitive interest rates and a financial environment favorable to productive investment, an essential condition for the sustainable recovery of the Mozambican economy”, adds the document.
(AIM)
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