The Mozambican Banking Association (AMB) announced that the reference interest rate for credit in the country, known as the prime rate, has been cut by a further 0.7 percentage points to 19.8 per cent as of November. This is the eighth consecutive cut in this rate in 2024, following a trajectory of decreases aimed at facilitating access to credit and supporting economic activity in the country, according to Lusa.
The prime rate, introduced in 2017 by the Bank of Mozambique in partnership with AMB, serves as a single reference rate for credit operations, adjusted only by a specific risk margin for each client. The aim of this measure is to simplify the calculation of interest and make credit conditions more predictable for consumers.
Since February 2021, when it reached a minimum of 15.5%, the prime rate has been progressively raised, reaching a peak of 24.1% in July 2023.
At the beginning of 2024, in January, the rate was at 23.5% and since then it has been steadily falling: to 23.1% in March, 22.7% in April, 22.3% in May, 22% in June and 21.2% in July, remaining at this value in August and September, and dropping to 20.5% in October. With the November reduction, the rate now stands at 19.8 per cent.
‘In September, the Monetary Policy Committee (CPMO) of the Bank of Mozambique decided to lower the MIMO rate from 14.25 per cent to 13.5 per cent, based on forecasts of controlled inflation, kept in single digits, in the medium term’
The series of reductions in the prime rate is related to the decrease in the monetary policy interest rate, or MIMO rate, a tool used by the Bank of Mozambique to control inflation.
In September, the Monetary Policy Committee (CPMO) of the Bank of Mozambique decided to lower the MIMO rate from 14.25 per cent to 13.5 per cent, based on forecasts of controlled inflation, kept in single digits, in the medium term.
‘The decision was underpinned by the continued consolidation of the outlook for keeping inflation low, in a context of a positive assessment of risks and uncertainties,’ the Bank of Mozambique said in a statement.
Since its creation with an initial rate of 27.75 per cent, the prime rate has been adjusted according to economic policy and market conditions. With this eighth reduction in the year, AMB and Banco de Moçambique intend to continue strengthening the credit environment and supporting economic recovery, while closely monitoring price stability and inflation.
