CTA calls for Mozambique interest rate reversal

Jan 19, 2011

The interest rate increases announced in Mozambique last week could have a detrimental effect on the lending power of the country's commercial banks, the Confederation of Mozambican Business Associations (CTA) has warned.

AIM News reports the CTA has urged the Bank of Mozambique to reverse the changes that were announced on January 11th, which increased the interest rates on money borrowed by commercial finance providers from the central bank from 15.5 per cent to 16.5 per cent.

In a statement published in the O Pais newspaper, the CTA - which describes itself as a "platform for dialogue" between the government and the private sector - warned banks will suffer as a result of the change.

"It will reduce consumption, which could result in reducing the total revenue of companies, worsening their cash flow problems," the body said, adding high interest rates will also dissuade private investors and increase unemployment.

The Bank of Mozambique's Monetary Policy Committee defended the move, noting there are still "signs of inflationary pressure" in the nation's economy that need to be addressed.