Economists today considered the central bank's decision to increase reserve requirements to be "harmful" for companies, pointing out that the measure "won't solve" the inflation spiral, because this "variable" is conditioned by "structural problems".
"It means that [companies] are going to pay their debts at a much higher cost" and this measure "could jeopardize the profitability and continuity of operations of many companies, it's the harmful part that accompanies these restrictive measures," said Egas Daniel, economist and coordinator of the Mozambique program at the International Growth Center (IGC) of the London School of Economics.
The profitability of companies' investments "is compromised", he stressed.
"No company plans to make investments on the basis of loans or bank financing in a context where interest rates are so high," emphasized Egas Daniel.
On the other hand, the survival of "some small banks" is at risk, he added, because they have to deal with "already extraordinary squeezes" imposed by the regulator.
The economist expressed doubts about the argument that excess liquidity is causing inflationary pressure, arguing that the rise in prices in Mozambique is caused by structural factors, such as the economy's weak production and productivity.
The Bank of Mozambique "can't find an economic structure that allows the measures to be effective," he said.
The economist pointed to the state's "chronic recourse" to bonds and treasury bills to finance public spending as another factor behind the high interest rates.
"The public sector doesn't contract its spending over time, it grows exponentially without being matched by revenue, which generates a greater deficit that has to be financed by the banks themselves," he stressed.
Economist Elcídio Bachita considered the decision to raise the mandatory reserve coefficients imposed on commercial banks to be risky.
"I'd say it's not exactly a prudent measure," looking at the state of the economy, he commented.
"Naturally, this will have its repercussions," because "commercial banks will have fewer financial resources to finance the economy," he continued.
"Commercial banks will be forced to raise interest rates, we're going to see a rise in what is the 'prime rate' of the national financial system, I believe next month or, at the latest, by August," he said.
The Bank of Mozambique "is acting in isolation," said Bachita, "without coordinating with other players in the national economy, because monetary measures alone are not proving effective in combating inflation."
For her part, Estrela Charles, an economist and researcher at the Centre for Public Integrity (CIP), a Mozambican non-governmental organization (NGO), considered that the increase in the coefficients is doomed to failure if it is isolated and does not take into account the structural nature of the dynamics of inflation in the country.
"We know very well that our inflation is not caused directly by the issue of excess liquidity in our economy, it is an inflation that is also caused on the supply side and on the production side," said Charles.
The decision, he continued, "will have no effect if it is not reconciled with fiscal policy".
By "drying up" the money in circulation, both in national and foreign currency, the central bank could negatively affect the exchange rate and create a counterproductive effect, making imports more expensive and increasing prices.
"Our country depends on imports and the exchange rate is a very sensitive variable for our economy," he said.
At issue is the increase in the mandatory reserves that commercial banks have to keep with the central bank: the regulator decided on Wednesday to raise the coefficients to 39% for liabilities (in the case of deposits) in national currency and 39.5% in the case of foreign currency.
This was the second increase of the year, and at the start of 2023 they were 10.5% and 11.% respectively.
Year-on-year inflation in Mozambique slowed in April to 9.6%, the lowest in 12 months.
The regulatory bank justified the action by the need to "absorb excessive liquidity in the banking system, with the potential to generate inflationary pressure", but the Confederation of Economic Associations of Mozambique (CTA) considered on Friday that the decision will make it even more expensive to take out bank financing, essential in an economy of small and medium-sized companies, which will find it more difficult. (sapo)
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