The Monetary Policy Committee of the Bank of Mozambique (CPMO), meeting in Maputo on Wednesday, decided to keep the main interest rates used by the bank unchanged.

Thus, the Interbank Money Market Rate (MIMO), used by the central bank for its interventions on the interbank money market to regulate liquidity, remains at 13.25 per cent, after it was raised by 300 percentage points in late January.

Likewise, the Standing Lending Facility (the interest rate paid by the commercial banks to the central bank for money borrowed on the Interbank Money Market) remains 16.25 per cent, and the Standing Deposit Facility (the rate paid by the central bank to the commercial banks on money they deposit with it) is also unchanged, at 10.25 per cent.

The CPMO also left the compulsory reserve coefficient, the amount of money that the commercial banks must deposit with the Bank of Mozambique, unchanged, at 11.5 per cent for local currency and 34.5 per cent for foreign currency.
A statement from the CPMO said “the decision reflects the prospects for keeping inflation to one digit (i.e. less than ten per cent), despite the worsening of risks and uncertainties, particularly the implications for the economy of the third wave of Covid-19”.

Those risks and uncertainties also included continued military instability in northern Mozambique, the effects of the recent riots in South Africa, the strengthening of the US dollar, and the increase in the international prices of oil and foodstuffs.

The forecast for inflation has been revised upwards, the CPMO said. The annual inflation rate rose from 5.49 per cent in May to 5.52 per cent in June, which the CPMO blamed on the depreciation of the Mozambican currency, the metical. It expected inflation to accelerate over the short and medium term, driven by rises in international commodity prices.

A slow recovery of the economy is expected for the rest of this year and in 2022. The CPMO put economic growth in the first quarter of 2021 at 0.12 per cent “driven by the positive performance of agriculture and public services”.

However, it warned that “the return of economic growth to the levels prior to the pandemic will require the deepening of structural reforms in the economy, seeking to strengthen institutions, improve the business environment, attract investment and create jobs”.

The country’s international reserves remain “at comfortable levels”, the statement added. The reserves are currently 3.8 billion US dollars, enough to cover more than six months’ imports of goods and services. (AIM-22 July 2021)