Private sector calls for lower interest rates

Private sector calls for lower interest rates
Private sector calls for lower interest rates

Africa-Press – Mozambique. The Confederation of Mozambican Economic Associations (CTA) and the African Development Bank (AfDB) are seeking solutions to mitigate the impact of rising interest rates, which makes it difficult for companies to honor their commitments to the banks.

The current interest rate practiced in the financial markets, including by the ADB, is around 20.5 percent, excluding the additions incorporated by each bank. Small and medium Mozambican companies that rely on financing from the AfDB say they cannot afford this.

The concern was expressed on Tuesday, in Maputo, by Fernando Couto, president of the Business Council of the CTA, at the end of the meeting held with the AfDB representative in Mozambique, César Abogo.

“At this moment, the interest rate is 20.5 percent, which is unaffordable for companies. We put this question to the ADB about the need to recheck this point”, said Couto.

According to Couto, for the survival of small and medium-sized businesses in the agribusiness sector, as well as to avoid layoffs and bankruptcies, there is a need to practice affordable interest rates, which would put the business fabric in a position to honor its commitments and participate actively in economic development.

“Under current conditions, it is virtually impossible to ensure the flourishing of the agribusiness sector even though this sector is often regarded as the solution for increasing exports and ensuring food security”, said Couto. “Many producers, who are in the agribusiness sector, do not have the capacity to use bank financing. We need security at the level of the logistics chain, looking at the high prices charged for the transport of agricultural products”.

“There are small and medium companies who have signed contracts with the ADB and who now have serious difficulties in repaying because of the increase in interest rates”, said Couto.

Couto also advocates internal logistics that facilitate the flow of products to the markets. As an example, he cited the coastal shipping recently re-launched in the country, but “unfortunately, it has not yet started to have the desired effect for producers and the entire agribusiness value chain”.

For his part, the AfDB representative said that, in the meeting with the CTA, it was not possible to reach a consensus on the concerns presented by Mozambican companies, financed by that multilateral credit institution. However, he recognizes that the concerns are legitimate and will deserve a joint evaluation.

Besides the concerns of the business sector, the meeting discussed the issue of the country’s access to the 1.5-billion-dollar package recently announced by the AfDB to face the food crisis, through financing initiatives in the agricultural sector.

“An additional package is in sight for the integrated Pemba-Lichinga project, recently launched by ADB to boost production and cope with the grain crisis. We are also looking for an additional package to the Special Agro-Industrial Processing Zone project of the Pemba-Lichinga integrated development corridor, in the north of the country”, said Abogo.

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