Successive rises in interest rates are making it impossible for some Mozambican companies to pay off bank loans, reports Mediafax
In order to fight inflation, the Banco de Moçambique has repeatedly hiked its key interest rates. Since October 2015, the Standing Lending Facility (the interest rate paid by the commercial banks to the central bank for money borrowed on the Interbank Money Market) has risen seven times.
The latest increase was in July, when the Banco de Moçambique increased the rate
by 300 base points, from 14.25% to 17.25%.
Commercial banks have followed the lead from the central bank and have increased their own interest rates, making the cost of loans, especially for small businesses, increasingly prohibitive.
A spokesperson for the Confederation of Economic Associations of Mozambique (Confederação das Associações Económicas de Moçambique, CTA), economist Eduardo Sengo, confirmed to Mediafax that there are indeed companies in this situation, although he did not name them, or say how many businesses find themselves unable to pay off their loans. They have approached the CTA, asking it to intervene with the banks in order to restructure the debts.
But the CTA does not want to be involved in negotiations with the banks. “These are questions of management of each company”, said Sengo. “The company must manage its situation with its bank”.
He said the CTA is urging companies in difficulties to analyse their current financial situation, and draw up a plan which they can present to their banks, in order to reach an understanding that will harm neither the companies nor the banks.
“Certainly they will reach a solution, and this is better than defaulting on their loans to the banks”, he added. But he stressed that, as far as the CTA is concerned, “this is a private matter between the company in debt and its bank”.
“We cannot intervene in the management of each company”, he said. However, the CTA has discussed the question of interest rates in general with the banks – notably the complaint that when the Banco de Moçambique increases its reference interest rates, the commercial banks do likewise, but when the central bank’s rates fall (as happened earlier in this decade), the commercial banks are reluctant to cut their rates.
“This has been discussed several times”, said Sengo, “because it seems that the commercial banks are much quicker to adjust to rises rather than to falls in interest rates”.
The banks had tried to justify this behaviour, claiming that, in setting their own interest rates, “they don’t depend exclusively on the central bank, but have a series of costs which influence the structure of interest rates”.
The CTA found such arguments unconvincing – the banks were effectively saying they had to follow the central bank’s lead when it increased interest rates, but not when it lowered them.
Sengo accused the commercial banks of opportunism – they were saying “we shall share what is bad, but we shall not share what is good”.
Source: Agencia de Informacao de Moçambique
Forex shortage raising concern in Mozambique
“To get US$10,000 to import a machine will take me 20 years”, a Mozambican entrepreneur complains.
With commercial banks in Mozambique limiting the amount of foreign currency that customers can withdraw each month, private customers and companies with foreign currency accounts are apprehensive at a time of severe economic and financial crisis.
Due to the decline in export sales, the Mozambican market has been experiencing a shortage of foreign currency recently, leading some banks to impose new monthly limits of US$500, €500 and ZAR1,000 on their clients. As such, entrepreneurs eager to venture into agro-processing are contemplating two decades of daily visits to the bank to raise the required capital.
Economists say that these measures should be complemented by concrete actions to increase production for exports, resulting in more foreign currency entering the country. Mozambique currently has exports worth about US$5-billion annually, up from US$300-million 20 years ago but nevertheless an amount far short of requirements.
Source: VOA Português
For insight; follow our blog at: https://yukonservice.wordpress.com
Yukon Services Clearing Agent License Holder
Yukon Services en Maputo | Clearing Agent in Mozambique | Top Website | Biggest English Portal | http://www.yukonservice.com | https://yukonservice.wordpress.com |
Hydrocarbon Logistics Centre | The Pemba Logistics Base | Nigerian Company Orlean Invest | Portos de Cabo Delgado (PCD)