Entrepreneurs warn that the increase in the mandatory reserves required of Mozambican commercial banks could have unpredictable consequences for the country's financial system.

At issue is the increase in the reserves that banks have to keep with the central bank (money parked, without remuneration): the regulator decided this week to raise the coefficients to 39% for liabilities (in the case of deposits) in national currency and 39.5% for foreign currency.

This is the second increase of the year, since at the beginning of 2023 they were 10.5% and 11.5% respectively.

To this end, the central bank justified the measure by arguing that it aims to absorb excessive liquidity in the banking system, which has the potential to generate inflationary pressure. However, entrepreneurs feel that the decision will increase interest rates, making it even more expensive to raise finance, which is essential in an economy of small and medium-sized companies, which will find it more difficult.

At a meeting between the Bank of Mozambique (BM) and the Confederation of Economic Associations of Mozambique (CTA), the entrepreneurs said that the measure could "shake up the financial system, especially the smaller banks, with consequences that we can't measure today.

For the president of the Portugal-Mozambique Chamber of Commerce, João Figueiredo, who is also the non-executive chairman of Moza Banco, the new coefficients are "truly unsustainable".

For his part, Oldemiro Belchior, vice-president of the CTA's Policy and Financial Services department, believes that the decision will pose challenges for the banks.

"We see difficulties for some small and medium-sized banks in complying with these requirements," especially at a time when "they are unable to quickly convert the deposits they take into credit, because market interest rates are relatively high and demand is increasingly depressed," said Oldemiro Belchior, adding that "it's time for Mozambique to think about alternative sources of financing the economy."

As an example, João Figueiredo suggested that lines be created for strategic sectors and that this funding be deducted from the mandatory reserves - an idea noted by the WB, he said.

Meanwhile, central bank administrator Silvina Abreu, who was present at the meeting, suggested that banks should use more "creative" ways to make financing the economy possible.