Why does not Prime Rate go down?

The interest rates practiced by commercial banks have long outstripped the Mozambican effort, ranging from 26% to 75.5%. Despite this, the central bank, which has reduced some of its leading rates, has not altered its prime rate, which is the index base for the cost of money in Mozambique. "Lowering interest rates is not only a decision of the central bank that is taken in the void it reflects an analysis of the conditions at all times and in society," tried to clarify Rogério Zandamela. But economist Fernanda Massarongo Chivulele argues that "the focus on controlling inflation and the consequent restrictive monetary measures have a positive effect on the performance of commercial banks, with increased costs for the private sector and Mozambican families." National citizens and companies that have credit products in one of the 20 commercial banks operating in our country are suffocated. Since the end of 2015, leasing or factoring interest rates on housing or consumer loans have deteriorated. Before the discovery of the unconstitutional and illegal loans of Proindicus and MAM, which precipitated the economic and financial crisis in which we are plunged, the Prime Rate stood at 19.5% at the moment, this unique index for the Mozambican Financial System, is established at 27.5%. But to calculate the cost of money in addition to the Prime Rate is added the spread of each of the commercial banks. The most expensive Spreads on the market are practiced by microfinance institutions with Opportunity Bank to head, charging up to 48%, added to the 27 , 5% of the Prime Rate, for consumer loans and for short or long term loans. Also high are the Spreads of Socremo Bank that charges 42.25% credits for credits to Housing or Consumption and also for loans of I enjoy. Long-term loans add up to 40.25% to Prime Rate.

Among the so-called "big five" of Mozambican commercial banks that have surpassed the universal "effort rate" threshold, which is the recommended limit for a customer to pay for a loan and is established worldwide in one third of fixed income, Banco Comercial e de Investimentos (BCI), which charges up to 40% in consumer loans and 39% in short and long-term loans. Also unbearable for an honest worker are the Millennium BIM interest rates, which charge up to 39.5 % in consumer loans up to 38.5% in long-term loans and may reach 37.3% in short-term loans. Equally high are Standard Bank interest rates which may reach 38.75% for loans to consumer spending and short-term loans, and reaches 37.75% in leasing or factoring and also in long-term loans. In the face of this asphyxiating scenario, not only for citizens but also for small and medium-sized enterprises following the central bank's Monetary Policy Committee meeting on Thursday (26) and "decided to reduce the MIMO rate by 50 basis points to 21.00%. Additionally, the agency reduced the rates of the Permanent Settlement Facility (CSF) and the Permanent Deposit Facility (FPD) by 50 basis points to 22.00% and 15.50%, respectively, as well as the Compensation Reserve Coefficient ( RO) for liabilities in national and foreign currency by 100 basis points, to 14.00%, "the Bank of Mozambique questioned why the Prime Rate does not fall?

"If you remember the definition of Prime Rate also includes a part of the interest rate that reflects monetary policy decisions, the MIMO rate is very much attached. So it is expected that the Prime Rate will also decline, but it is not the only component of Prime Rate, but everything else if nothing changes in principle Prime Rate should also fall as a result of the measure we take if other factors that also determine the Prime Rate do not change. But it is a combination of policy decisions, market decisions and credit institutions, it is not that the Bank (of Mozambique) forces a Prime Rate "tried to clarify Rogério Zandamela.

Tax consolidation and state reforms condition declines in interest rates. 

Faced with insistence and the question whether interest rates would not be unbearable, Zandamela acknowledged that "interest rates remain high. They are high, we have recently been reducing, but they are not yet at the levels we would like to see. We believed that at this time of year the short-term interest rates, which are those we control, would be at relatively lower levels than those we are today. " "But unfortunately for a combination of factors, both domestic and international, risk factors, the conditions were not designed for that to happen. That would be irresponsible on our part, within the Legislator's mandate, to lower interest rates in a way that does not reflect the reality we face, "said the Governor of the Bank of Mozambique. Zandamela also revealed that "if there is one thing that we debate intensely and emotionally, with all the necessary passion is the question of the level of interest rates. And we always ask ourselves what can we do, Banco de Moçambique, so we can lower interest rates to levels that society wants and asks for, and what is needed. The conditions are not only monetary part, it is the fiscal, they are reforms. So the process of fiscal consolidation and certain reforms, which have already begun and have been happening, was slower than anticipated. " Without pointing a finger at the reforms and actions that belong to the government of Filipe Nyusi Rogério Zandamela explained that the central bank can not "lower interest rates without these conditions existed, would be shot a shot in the foot, we would go back in terms of loss of reserves, in terms of greater volatility in the exchange, in terms of higher inflation than we have today. We have today inflation on a single digit because it was a great result of this caution that we have, and since our main objective as a central bank is low inflation, in the interest of society, we have been prudent and we will continue to be prudent ".

Banco de Moçambique's monetary policy protects profits of commercial banks during the crisis.

"But I also want to be frank, as I said we have inflationary tendencies that are there, we do not know what magnitude they are. There are risks that could materialize that we can not even define them today, so it is up to us again, fulfilling the mandate that the Legislator did not give, if the technical evaluation of the situation is such that it compels us, it is not what we want to do , we will have to do what we have to do, this is our position. 

"The Governor of the Bank of Mozambique also stated that" I hope and I pray that we will not go there tendency, but if that is what conditions demand we will have to act. In summary, lowering interest rates is not only a decision of the central bank that is taken in the void it reflects an analysis of the conditions at all times and in society. "But according to economist Fernanda Massarongo Chivulele" monetary policy focused on the inflationary aggregates and the exchange rate ends up being another barrier that undermines the development possibilities of a private sector (financed by the domestic financial sector) that can respond to domestic demand, replace imports and thus reduce pressures on the balance On the other hand, the economist who studies the behavior of interest rates in Mozambique for several years argues in an article in the publication of the Institute of Social and Economic Studies (IESE) "Challenges for Mozambique 2017", noted that "the monetary policy, to a certain extent, protects banks' profits at a time when Mozambique's economy to some shock. That is, the focus on inflation control and the consequent restrictive monetary measures, which include increases in benchmark interest rates in times of economic shock or increase in Treasury bills, have a positive effect on the performance of commercial banks, with increased costs for the private sector and Mozambican families.

TRANSPARENCY IN RESOURCES

The Mozambican government on Monday reiterated its commitment to transparency in the management of mineral resources, through the popularisation and national ownership of the Extractive Industry Transparency Initiative (EITI). To this end, according to the National Director of Geology and Mines, Elias Xavier Daudi, it is crucial to publicise good quality information about EITI, its nature and its goals, and how it is being implemented in Mozambique. He was speaking at the official launch of the project to strengthen the capacity of civil society organisations about EITI, and particularly its communication component.

“We hope that Mozambican citizens will have access to more good quality information and more spaces for debate and collective learning about EITI, so that they may take ownership of it and transform it into their banner”, said Daudi, “marking the collective commitment to transparent management of our natural resources, as we move towards sustainable and inclusive development”.

He stressed that, in granting greater visibility and public knowledge to EITI, the project intends to contribute to national ownership of the mechanism, from a perspective of freeing it from the image of an outside body, and “fully integrating it into the institutional structure of the state”.

The official take-off of this project coincided with publication of the first educational brochure and first information bulletin about EITI.EITI describes itself as “the global standard to promote the open and accountable management of oil, gas and mineral resources”, which “seeks to address the key governance issues of the oil, gas and mining sectors”.EITI requires governments and companies to disclose information on oil, gas and mining revenues. The key disclosures are how much money companies in the extractive industry claim to pay to governments, and how much the governments say they receive. Any discrepancies must be explained. Each EITI implementing country must publish to an annual report disclosing information on such matters as contracts and licenses, production, and revenue collection and allocation.Mozambique is one of 53 EITI implementing countries, and has been declared EITI-compliant since 2012.

AFTER MOCIMBOA DA PRAIA ATTACKS

According to the Public Prosecutor’s Office in the northern Mozambican province of Cabo Delgado, about 100 people have been detained in connection with the abortive islamist uprising in Mocimboa da Praia district on 5 October, reports Tuesday’s issue of the independent daily “O Pais”.50 of these detentions have been formalised, and he detainees will stand trial. The delays in the other cases, the Public Prosecutor said, is because everything is being done to ensure that the detainees enjoy the right of defence.A prosecution source told the paper that the great majority of the detainees are Mozambican citizens, and they include some women. However, there are some foreigners – but the source did not reveal how many, or from which countries they came.Furthermore, the attacks in Mocimboa da Praia, in which 16 people died (two policemen, a community leader and 13 islamists), did not come as a complete surprise. The source said there had been earlier disturbances in the district of Chiure, where “we had cases of individuals who were using religion to commit certain acts which, as far as we are concerned, are contrary to the established order in the Republic of Mozambique”.Some of the people arrested in Chiure were brought to trial and sentenced. The source gave no further details. This is the first time there has been any mention of the Chiure islamist disturbances in the Mozambican media.Last week the Cabo Delgado provincial government met with the local moslem community to discuss the Mocimboa da Praia attacks. The provincial branch of the Islamic Council of Mozambique denounced the attacks and promised to collaborate with the authorities to ensure peace and stability.According to information reaching “O Pais” about the meeting, the Islamic Council stressed that the events in Mocimboa da Praia “bring no dignity to the moslem community, much less to the Islamic Council”.The Council agreed to send opinions to the government about any moslem organisation entering or working in Mozambique. The meeting underscored the need to strengthen collaboration between the police and religious and community leaders, in order to prevent further illegal acts.

Changes in secreta

In a post-Congress reshuffle triggered by ill health and the need to prepare for the integration of Renamo forces, President Filipe Nyusi last week appointed new heads in the military, police and security services. Lagos Lidimo steps down as director general of the State Intelligence and Security Service (SISE), while Graca Chongo retires as armed forces (FADM) Chief of Staff. Both are known to be seriously ill. And the deputy commander of the national police (PRM), Jose Weng San, died two weeks ago after a lengthy illness. Lazaro Menete, formerly commander of the army, is promoted to be the new armed forces head, replacing Chongo. Prior to his army service, he was a rear admiral and navy commander. The armed forces deputy chief of staff Raul Dique was named by Nyusi last year, and is one of the senior officers who came from Renamo after the 1992 peace accord. Menete is replaced as army commander by Ezequiel Muianga, former chief of staff of the Presidential Guard.

Julio dos Santos Jane, who had been named police commander by Nyusi in March 2016, replaces Lidimo as head of SISE. He is a lawyer who received military training in the USSR. During the 1982-92 war, Jane was in charge of the military unit protecting Maputo and successfully repelled Renamo. (O Pais, 4 Mar 2016) Jane was later marginalised by Guebuza. Bernardino Rafael, formerly head of the Maputo City Police, was promoted to police commander to replace Jane. Timoteo Bernardo, formerly head of the Manica provincial police, becomes the new police deputy commander, replacing Weng San.

Comment: This reshuffle confirms that Nyusi finally consolidated his power at the Frelimo Congress, nearly three years after he took office as President. But it also is looking ahead to the integration of Renamo into the military and security services.In an attempt to remove key people linked to former President Armando Guebuza, Nyusi looked back to people of the Chissano generation, who were relatively old but had no loyalty to Geubuza. Lidimo had been made armed forces chief of staff by Chissano and was sacked by Guebuza in 2008. Lidimo was born in 1950 and was already ill when Nyusi pulled him out of retirement early this year to reduce the Guebuza influence in SISE.Jane is from Manica, but has been a personal friend of Nyusi since the time he was provincial police commander in Nampula and Nyusi was head of the northern railways. Lidimo was appointed in part because he was Makondi and it seemed important to use his Makondi backers to consolidate control of SISE – and now seems to have always been a short term appointment. By contrast, naming Jane gives Nyusi personal control of SISE.It now appears there is at least outline agreement with Afonso Dhlakama on integration of Renamo generals and soldiers into the army, police and SISE, and that this will need to start early next year. This is a is a touchy issue, both because hard-liners, notably in the Guebuza wing of Frelimo, had opposed this, and because Dhlakama felt, with some justification, that his generals and soldiers were marginalised in the new joint army in 1994.Thus Nyusi appears to be appointing people who are both loyal to him and willing to seriously integrate Renamo. Menete was only named army commander in June 2016, but Nyusi used the installation ceremony to say that reconciliation inside the armed forces (FADM) is one of the great victories achieved by the Mozambican people: “this reconciliation, which today joins together officers who yesterday were on opposing sides, must continue to inspire the values of inclusion and professionalism inside the family of the defence and security forces”. A clear message that Menete would oversee integration.Much of the fighting against Renamo in 2015/16 was done by the special police riot squad, and not by the army, which was limited to ineffective shelling of Dhlakama’s mountain headquarters. Thus Renamo is unlikely to have personal grudges against Manete. Under President Joaquim Chissano, Mozambique intentionally kept only a weak army, in part to prevent a military coup. Few soldiers from either side joined the new army in 1994 but many officers did, and they had with little to do. Guebuza built up a larger military, with weaponry bought partly with the $2 bn secret loan. The obvious choice now would be to return to the Chissano model – an ineffectual military which could allow Renamo generals in senior positions because all army posts would be sinecures.