Mozambique's economy is recovering, but growth remains insufficient to meaningfully improve living conditions for the population. That warning was delivered on Wednesday, 28 October, by Bank of Mozambique (BdM) Governor Felisberto Dinis Navalha, who identified public debt and state payment arrears as key obstacles to business financing.

Speaking at the opening of the central bank's 51st Advisory Council meeting, held in Tete, Navalha noted that following a contraction of 0.2% in 2025, the economy grew by 1.7% in the second quarter of 2026. While the figure signals a recovery, it remains below the country's potential and falls short of what is needed to make a meaningful dent in poverty.

Quoted by Lusa, Navalha pointed to escalating geopolitical tensions in the Middle East and rising international prices for fuel, food, and transport as factors weighing on economic activity.

On the domestic front, public debt and the accumulation of state payment arrears continue to push up the cost of credit and limit the availability of financing for the private sector. According to the governor, these factors are driving banks to concentrate their liquidity in money market instruments, restricting the flow of resources into the broader economy.

Sound Banks, Constrained Lending

Indicators presented by the central bank point to a banking sector capable of withstanding shocks. In September, the solvency ratio stood at 29% and the liquidity ratio at 55.5%, while non-performing loans hovered around 7%.

The financial solidity of banks coexists, however, with difficult access to credit for businesses. Liquidity availability within the system does not automatically translate into investment financing, in a context defined by public debt pressures and government payment arrears.

Moderate Recovery Projected for 2027

For 2027, the BdM anticipates a continuation of the recovery, supported by agriculture, the extractive industry, and services. Expansion is nonetheless expected to remain at a moderate pace and to stay exposed to both internal and external risks.

Among the principal threats, Navalha highlighted the trajectory of public debt, state payment arrears, extreme weather events, and geopolitical tensions. A deterioration of these pressures could prompt the central bank to revise its current monetary policy stance.

For the governor, accelerating growth requires a response that goes beyond monetary measures. Greater fiscal discipline, an improved business environment, and structural reforms are necessary conditions to stimulate investment and translate economic recovery into job creation and improved living standards.