The Bank of Mozambique says that the ongoing issuing of debt securities to finance the state accounts deficit is aimed at controlling liquidity in the market.
Since donors froze direct support to the state budget in April 2016, the central bank has been issuing treasury bonds to finance the public accounts deficit. However, the issuing of these short-term government bonds limits lending to the private sector and households as well as making it increasingly expensive.
But the central bank governor, Rogério Zandamela, argues that the measure is there to control the liquidity of the market, adding that few investors show interest in buying public debt securities.
The private sector regularly criticises the issuing of treasury bonds in Mozambique for purchase by commercial banks as relentlessly absorbing money that could otherwise finance small and medium-sized enterprises.
By Edson Arante
Source: O País via Club Of Mozambique