“Credit to the economy will grow this year”

Credit to the economy is expected to grow this year, prompted by an improvement in economic activity compared to last year, increasing Covid-19 immunization both globally and nationally, and the reopening of various economic sectors.

Government forecasts based on data provided by the Bank of Mozambique and cited by ‘Notícias’ indicate that, last year, credit to the economy reached 288,841 million meticais, an increase of 8.80% compared to the previous year. This year, the amount could reach 331,301 million meticais, representing a 14.70% growth. The government also says that, with a view to contributing to the country’s macroeconomic stability, reflected by the achievement of the single-digit inflation target, the Bank of Mozambique will this year continue to prioritise the implementation of a prudent monetary policy, based on the calibration of its monetary policy, with the emphasis on the alignment of its benchmark MIMO interest rate with macroeconomic fundamentals.

In the foreign exchange market, the monetary authority will take into account the need to ensure an adequate level of gross international reserves (GRI) to cover approximately six months of imports of goods and services, as well as to limit excessive exchange rate volatility against the main and commercial currencies of the country, especially when this is not due to macroeconomic fundamentals.  With regard to the balance of payments, government forecasts point to a possible deterioration of the current account deficit, resulting from the worsening of the goods account balance.

The increase in the goods account deficit is the result of the notable increase in imports, especially large projects, reflecting the implementation of the Coral Sul-FLNG project, in the Rovuma Basin.

With regard to exports, growth of around US$1,024 million is expected, essentially reflecting the increase in large projects (US$979 million), thanks to the gradual recovery of external demand and the prices of goods on the international market. As for foreign direct investment (FDI), the government anticipates a net inflow of US$3,189 million this year, a reduction of US$535 million compared to last year’s projection. The drop in FDI this year is largely explained by changes in the course of projects in the northern part of the country.