Mozambique’s banks are dependent on the state to grow

19 September 2017

Mozambique’s banking sector has become reliant on loans to the public sector to maintain growth due to the economic environment created by the state’s financial default in 2016, according to consultancy BMI Research.

In a note on the financial sector sent to analysts, the Fitch group consultancy adds that this is because “the government has increasingly been kept away from international markets following the disclosure of hidden debts and subsequent financial default.”

With limited access to external financing, the government has increasingly relied on national banks for credit, BMI said, adding that this is unlikely to be a sustainable growth model for banks.

BMI Research added that credit provided by banks to the government through the purchase of public debt securities saw annual growth of 19.1% on average, compared with an average increase of just 4.1% in public credit to companies and individuals.

“This model is not sustainable beyond 2018, given that the agreement that the government may sign with the International Monetary Fund will require a reduction of public debt,” said the BMI Research report, quoted by the Lusa news agency.

The consultancy also noted that potential IMF loans have a lower interest rate and will eventually replace the role of the Mozambican banking sector as a State creditor. (macauhub)