Maputo, Mozambique – In a move signaling growing confidence in the nation's economic stability, the Banco de Moçambique (BM), Mozambique's central bank, announced today, September 29, 2025, its eleventh consecutive reduction of the main interest rate, the MIMO rate. The policy rate now stands at 9.75%, down from 10.25%, continuing an easing cycle that began in January 2024. This sustained monetary relaxation is primarily driven by the central bank's assessment of contained inflation and a stable macroeconomic outlook, aiming to invigorate economic growth in non-extractive sectors.

The consistent lowering of borrowing costs is expected to have immediate implications for Mozambique's economic landscape. Businesses and consumers are likely to benefit from cheaper credit, potentially stimulating investment, consumption, and overall economic activity. While the central bank acknowledges some recent uptick in inflation, it maintains a strong conviction that single-digit inflation will persist in the medium term, providing a stable environment for this growth-oriented monetary policy. This strategic pivot from inflation-fighting to growth-enabling is also anticipated to bolster investor confidence and potentially influence local commodity prices.

Sustained Disinflation Paves Way for Growth-Oriented Policy

The decision to cut the MIMO rate by 50 basis points to 9.75% marks a significant milestone in Mozambique's monetary policy trajectory. This latest reduction is part of an aggressive easing cycle that has seen the policy rate steadily decline from a high of 17.25% in January 2024. The Monetary Policy Committee (CPMO) of the Banco de Moçambique has consistently justified these cuts by pointing to the successful containment of inflation, which has largely remained within single digits. For instance, headline inflation dipped to 3.96% in July 2025, although it saw a slight increase to 4.79% in August 2025, mainly due to food and non-alcoholic beverage prices. Despite this minor fluctuation, the central bank projects inflation to remain stable in the medium term.

This prolonged period of disinflation has been supported by a combination of factors. Prudent monetary policy, initiated with higher rates, effectively anchored inflationary expectations. Furthermore, fiscal consolidation efforts have seen the government's deficit narrow, reducing pressure on public finances and, by extension, on prices. External stability, characterized by a stable Mozambican metical and healthy foreign exchange reserves throughout 2025, has also played a crucial role, insulating the economy from imported inflation and capital flight risks. Favorable international commodity price trends have further contributed to the disinflationary environment, giving the central bank room to maneuver.

Key players in this decision include the Banco de Moçambique's Monetary Policy Committee, led by its Governor, who have been at the forefront of navigating the country's monetary policy. The government, through its fiscal policies, also plays a supportive role in creating a conducive macroeconomic environment. Initial reactions from business associations, such as the Confederation of Economic Associations of Mozambique (CTA), have been overwhelmingly positive. The CTA views these rate reductions as vital for improving access to credit, lowering financing costs for businesses, and encouraging productive investment across various sectors, including agriculture, industry, energy, and tourism. This sentiment underscores a broader anticipation of economic revitalization.

Sectoral Winners and Losers: Opportunities Emerge from Cheaper Credit

The continuous easing of Mozambique's monetary policy is set to reshape the financial landscape for public companies operating within the nation, creating distinct winners and offering new opportunities across key sectors. The primary beneficiaries will be companies with significant debt exposure and those poised for expansion, as lower interest rates directly translate to reduced borrowing costs and more affordable capital for investment.

Companies in sectors such as Agriculture, Industry, Tourism, and Construction are particularly well-positioned to benefit. Historically, these sectors have faced prohibitively high interest rates, often exceeding 20-30% for local small and medium-sized enterprises (SMEs), making credit access a major hurdle. With the MIMO rate now at 9.75%, agribusinesses can secure cheaper loans for essential inputs like seeds, fertilizers, and equipment, boosting productivity and potentially increasing exports. Similarly, industrial firms can finance modernization and expansion plans more affordably, enhancing their competitiveness. The nascent tourism sector, rich with potential, will see SMEs gain better access to credit for infrastructure development and service improvements, fostering growth and job creation. Local construction companies, which are crucial for the nation's infrastructure development, will also experience a significant easing of financial burdens, allowing them to expand operations and undertake more projects.

While major international players in the Energy sector, particularly those involved in large-scale Liquefied Natural Gas (LNG) projects, often rely on international financing, they too could see benefits. Lower domestic interest rates can reduce costs for their local operations, joint ventures, or local supply chain partners. A more stable and attractive domestic lending environment generally signals an improved investment climate, which can indirectly encourage further foreign direct investment. However, companies that are highly liquid and rely less on debt, or those whose business models thrive on higher interest rate environments (e.g., certain financial institutions that haven't adapted), might see some margin compression or reduced relative advantage, though the overall economic stimulus is expected to be broadly positive. The Confederation of Economic Associations of Mozambique (CTA) has been vocal in its support, emphasizing that these cuts will lower costs for entrepreneurs and stimulate investment, particularly for new borrowers and those able to renegotiate existing loans, largely benefiting local enterprises.

Broader Implications: A Regional Trend Towards Growth and Investment

Mozambique's sustained monetary easing aligns with a broader trend observed in several African emerging markets in the post-pandemic era. Countries like Zambia and Ghana have also cautiously begun to unwind their tight monetary policies, moving towards easing cycles as inflationary pressures subside. This regional shift reflects a global economic outlook for 2024 and 2025 characterized by moderate growth and slowing inflation, creating a more conducive environment for central banks to prioritize economic stimulus. The Banco de Moçambique's confidence in maintaining single-digit inflation, supported by a stable exchange rate and favorable international commodity prices, positions it firmly within this emerging market narrative.

The ripple effects of Mozambique's lower interest rates could extend to regional economies and trade, particularly within the Southern African Development Community (SADC). While direct, immediate impacts on regional trade might be tempered by existing administrative and logistical hurdles, the reduced cost of capital could make Mozambique a more attractive destination for intra-regional investment. If lower interest rates contribute to a slight depreciation of the Mozambican metical, it could theoretically enhance the competitiveness of Mozambican exports within the region. Mozambique already benefits from relatively lower trade barriers compared to some neighbors, suggesting a potential, albeit gradual, increase in its trade footprint, especially in extractive sectors and certain agricultural products.

From a regulatory and policy perspective, the consistent rate cuts send a strong positive signal to foreign investors. The government's active efforts to revise its legal framework for investments, including the new investment law (nr. 8/2023) and its pending implementing regulations, aim to complement the monetary policy by offering tax incentives and facilitating land use rights. The stability of the banking sector, with solvency and liquidity ratios well above regulatory minimums, further reassures potential investors of a robust financial environment. While challenges such as corruption and the impact of past political events remain on investors' radars, the combined efforts of monetary easing and regulatory reforms are designed to solidify Mozambique's appeal as a destination for foreign direct investment in high-potential sectors. This strategic pivot from crisis management to growth enablement is a critical policy implication, signaling a long-term commitment to fostering a vibrant private sector.

The Road Ahead: Navigating Growth, Risks, and Diversification

Mozambique's eleventh consecutive interest rate cut sets the stage for a dynamic period, with short-term optimism balanced against long-term challenges and the imperative for strategic adaptation. In the immediate future, the remaining months of 2025 are likely to see increased economic activity, driven by the reduced cost of borrowing. Businesses, especially those in the non-extractive sectors, are expected to capitalize on cheaper credit to fund expansions and new projects, contributing to the government's projected GDP growth of 1.9% to 2.5% for the year. While inflation saw a slight uptick in August 2025, the central bank remains confident in its single-digit trajectory, providing a stable foundation for this growth. The relative stability of the Mozambican Metical (MZN) is also expected to hold steady, further supporting the easing policy.

Looking further ahead into 2026 and beyond, the long-term possibilities for Mozambique hinge on successful economic diversification and robust policy implementation. Projections from institutions like the African Development Bank (AfDB) and Nedbank anticipate accelerated economic growth, with the government aiming for an ambitious 5.5% annual growth under its Five-Year Plan (2025-2029). Foreign Direct Investment (FDI), particularly in the extractive sector with the anticipated resumption of TotalEnergies (EPA: TTE) LNG project and Eni (BIT: ENI) second platform, will continue to be a primary growth driver. However, the true test lies in broadening this growth beyond natural resources. Strategic pivots are crucial: businesses must actively pursue opportunities in agriculture, manufacturing, tourism, and renewable energy, while the government must prioritize fiscal prudence, accelerate structural reforms, and invest heavily in human capital and infrastructure to support these diversified sectors.

Emerging market opportunities are abundant, particularly in natural gas mega-projects, which will continue to attract significant FDI. Beyond gas, the vast potential in agriculture and agribusiness, coupled with a recovering tourism sector and growing interest in renewable energy, offers avenues for sustainable development. Government initiatives like the National Program for Industrializing Mozambique (PRONAI 2021-2035) aim to foster value-added industries by processing local raw materials. However, significant challenges persist, including potential inflationary pressures and Metical devaluation in 2026, ongoing political instability and security concerns in regions like Cabo Delgado, and the country's high vulnerability to climate change. High public debt and governance issues also remain critical hurdles. The optimistic scenario envisions Mozambique successfully leveraging gas revenues for broad-based diversification, while a pessimistic outcome could see renewed inflationary pressures, stalled reforms, and persistent instability, underscoring the delicate balance the nation must maintain.

Wrap-Up: A New Era for Mozambique's Economy

Mozambique's central bank has embarked on a remarkable journey of monetary easing, culminating in its eleventh consecutive policy rate cut to 9.75% on September 29, 2025. This sustained reduction, totaling 700 basis points since January 2024, marks a pivotal shift aimed at stimulating economic activity and cementing a stable, low-inflation environment. The key takeaway is the central bank's unwavering confidence in contained inflation, supported by a stable Metical and favorable international commodity prices, providing a robust foundation for this growth-oriented strategy.

Moving forward, the market is poised for a period of cautious optimism. While GDP growth for 2025 is projected modestly, the long-term outlook anticipates acceleration, fueled by significant Foreign Direct Investment (FDI) in the extractive sector, particularly from companies like TotalEnergies (EPA: TTE) and Eni (BIT: ENI) in LNG projects. The lasting impact of this monetary policy is expected to be profound, fostering greater economic diversification beyond natural resources and significantly boosting investor confidence through more accessible and affordable credit. This strategic pivot from inflation-fighting to growth-enabling is a clear signal of Mozambique's commitment to creating a more dynamic and inclusive economy.

Investors should closely monitor several critical factors in the coming months. The trajectory of inflation, despite current stability, remains paramount; any resurgence could prompt a reversal of the easing cycle. Fiscal consolidation efforts and effective public debt management by the government will be crucial for sustained macroeconomic stability. Progress on major infrastructure and LNG projects, alongside the political and security environment, particularly in Cabo Delgado, will continue to influence investment decisions. Finally, the actual acceleration of lending growth, especially to small and medium-sized enterprises (SMEs), will be a key indicator of whether the monetary easing is effectively translating into broad-based economic activity. Mozambique presents compelling opportunities, but vigilance regarding its fiscal vulnerabilities and external risks remains essential for navigating its evolving market landscape.

This content is intended for informational purposes only and is not financial advice