In spite of its economic challenges, Mozambique’s banking sector is proving resilient. Thanks to local projects and international partnerships, the financial sector is optimisticIn 2007, the World Bank celebrated Mozambique’s “blistering pace of economic growth”. However, a recent slowdown now threatens to undermine the country’s progress. Higher-than-expected government borrowing has shaken confidence in Mozambique’s economic prospects, with foreign direct investment falling 20 percent in the past year.
There are, however, signs of improvement. The discovery of 20 billion barrels of natural gas in 2011 promises to transform the economy, but there are still many challenges that must be overcome if the country’s economy is to continue to develop.
In light of Mozambique’s recent economic troubles, World Finance spoke to Paulo Sousa, CEO at BCI Mozambique, about the company’s leading role in the domestic financial sector and how international partnerships could hold the key to a brighter future.
How has the banking industry in Mozambique fared in recent years?
Mozambique’s economy has contracted significantly over the past few years, owing to a drop in commodity prices and a significant reduction in international aid. This has been reflected in the sharp depreciation of Mozambique’s currency (the metical) and a fall in business revenues.
In the hope of avoiding a systemic crisis, the Bank of Mozambique has decided to intervene, taking over the management of one financial institution and liquidating another. Tighter regulations should also help to stabilise the currency market, increase the shareholder equity required of operators and enforce more demanding solvency ratios.
However, there were signs of economic recovery in the first half of 2017, with GDP growth standing at 2.9 percent and strong performances by extractive industries, financial services and trade. The metical, in response to the restrictive monetary policies adopted by the Bank of Mozambique, has also shown signs of stability. This has helped to reduce inflation in addition to increasing international reserves.