Mozambique implements fiscal reforms and maintains interest rates

Mozambique is implementing significant fiscal and monetary adjustments to address economic imbalances and debt pressures. The Council of Ministers has approved new regulations for Corporate Income Tax (IRPC), Value-Added Tax (VAT), and Personal Income Tax (IRPS). These reforms aim to broaden the tax base and include the digital economy, specifically targeting digital goods and services provided by non-resident suppliers.

On the monetary front, the Banco de Moçambique has maintained the MIMO interest rate at 9.25%. However, the central bank is introducing a new 18-month compulsory reserve regime designed to incentivize bank lending to companies that increase exports or substitute imports. The bank cited geopolitical tensions and climate shocks as ongoing risks to inflation and food prices.

These measures follow a credit rating downgrade by Standard & Poor’s from CCC+ to CCC, which highlighted an increased likelihood of external debt restructuring due to liquidity and budgetary pressures. Central bank Governor Felisberto Navalha noted that while the downgrade reflects structural economic difficulties and high public debt, ongoing fiscal reforms and increased exports are expected to eventually reverse the trend.