Bank of Mozambique Governor Felisberto Navalha said yesterday that the Mozambican economy continues to recover at a moderate pace, but warned that growth remains insufficient to significantly improve the population’s living conditions.
“With regard to our country’s macroeconomic performance, it is important to highlight that our economy continues to grow at a moderate pace, which is nevertheless still insufficient to bring about an improvement in the population’s living conditions,” the governor said at the opening of the 51st meeting of the central bank’s Consultative Council in Tete.
The economic recovery is taking place against a backdrop of inflationary pressures, credit constraints and high levels of public debt.
According to Felisberto Dinis Navalha, following the contraction of 0.2% recorded in 2025, the Mozambican economy grew by 1.7% in the second quarter of 2026.
“Indeed, after the contraction of 0.2% recorded in 2025, the economy grew by just 1.7% in the second quarter of 2026, remaining below its potential and the country’s poverty reduction objectives,” he said.
The governor attributed some of the difficulties to the international situation.
“This recovery took place in an adverse external environment,” he said, pointing to the escalation of geopolitical tensions in the Middle East and the resulting increase in international prices for fuel, food, transport and logistics.
Against this backdrop, the central bank opted to halt the cycle of interest rate cuts, the governor also explained in the same address: “We have maintained a prudent monetary policy stance.”
He explained that the cycle of reductions in the MIMO rate was halted in March, with the rate held at 9.25%, and that in May the central bank increased reserve requirements on deposits in national currency from 29% to 39%.
Annual inflation, which accelerated from 4.41% in April to 7.51% in June following fuel price adjustments, subsequently slowed to 6.31% in September.
Despite this, Navalha warned of several domestic constraints, stressing that “the conduct of monetary policy continues to face significant challenges”.
“The continued increase in public debt and the accumulation of government arrears contribute to greater rigidity in market interest rates and the concentration of banking liquidity in interbank money market instruments, limiting the expansion of credit to the economy,” he acknowledged.
Reflecting this situation, bank lending grew only modestly, increasing by just 0.5% up to September compared with the same period in 2025, he added.
Nevertheless, the governor of Mozambique’s central bank considered that the banking sector continued to show robust indicators: “Additionally, the financial system remained sound and resilient.”
According to Felisberto Navalha, in September the banking sector had a solvency ratio of 29% and a liquidity ratio of 55.5%, both above the regulatory minimums, while non-performing loans remained close to 7%.
He anticipated that the economic recovery would continue in 2027, but “at a moderate pace, driven by the performance of agriculture, the extractive industry and services”.
However, he warned of domestic and external risks, including developments in public debt, government arrears, climate shocks associated with the El Niño phenomenon, and international geopolitical tensions.
“It is in this context that the Bank of Mozambique will continue to monitor the evolution of these risks and uncertainties, and, should the worsening trend persist, it may reverse its current monetary policy stance,” he warned.
The governor also argued that economic recovery would depend not only on monetary policy but also on broad reforms.
“In addition to monetary policy measures, fiscal consolidation, an improved business environment and other structural reforms remain essential to sustain a rapid economic recovery and promote job creation in our country,” he concluded.
