Mozambique: Food inflation could reach 12%, economist warns — AIM report

Daniel Egas, one of Mozambique’s prominent economists, believes that the country’s food inflation may reach 12% in the coming months as a result of macroeconomic pressures and weaknesses in monetary policy. According to Egas, who was speaking on Monday in Maputo at the presentation of EuroCam’s business climate report during the Mozambique–Italy Business Conference, limited access to productive credit and misaligned financing are key risks. “Despite the central bank cutting its benchmark interest rate to 9.25%, the financial system has not translated the cut into higher productive investment.

The reduction in interest rates has not resulted in a proportional increase in productive investment,” he said. According to Egas, the country’s financing structure favours sectors with quick returns over long-term productive activities. “The economy tends to finance sectors with high cash turnover, leaving strategic sectors for sustainable growth underfunded,” he said.

He noted that the agricultural sector, for example, accounts for 21% of Gross Domestic Product (GDP), but receives only 3% of total credit in the economy. “This is a significant structural misalignment between the sector’s weight and access to financing,” he said. The economist, citing the report, also warned of growing pressure on public finances, saying that “public expenditure is rising faster than revenue, and the state is increasingly relying on short-term domestic financing”.

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“We are reaching the limit of the domestic financial system’s capacity to finance the state. The risk of food inflation and fiscal crisis will increase,” he added.

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