The Mozambican Banking Association (AMB) announced this Friday (29) that it will keep the reference interest rate for credit unchanged at 15.50% for the month of June. This marks the second consecutive month without changes, following three reductions recorded since the beginning of this year.
Known as the ‘prime rate’, the rate had been gradually declining since January 2024, after having remained at its peak of 24.1% for six consecutive months. In January this year, AMB reduced it by 10 basis points, setting it at 15.70%.
In February, the rate remained unchanged despite a cut in the policy rate decided by the Bank of Mozambique (BdM). In March and April, further reductions of 10 basis points were recorded, before stabilising in May and now remaining unchanged for June.
The variations in the ‘prime rate’ are linked to the MIMO rate, used by the BdM as its main monetary policy tool to control inflation, directly influencing the formula used by commercial banks to determine the cost of credit.
Before this AMB decision, the Bank of Mozambique had opted on Monday to keep the MIMO rate at 9.25%, while also announcing an increase in the mandatory reserve requirement in local currency and acknowledging that inflation could reach double digits due to the fuel crisis.
“This decision stems from prevailing high uncertainty regarding the duration of the conflict in the Middle East and its impact on supply chains and the availability of goods, as well as on international and domestic fuel and food prices,” explained central bank governor Rogério Zandamela at the end of the Monetary Policy Committee (MPC) meeting held in Maputo.
The committee decided to keep the MIMO rate unchanged, as it had already done in March, following 12 consecutive cuts over 24 months, starting in January 2024. Additionally, the MPC increased the reserve requirement ratio in local currency from 29% to 39% of deposits that commercial banks must hold at the central bank. According to Zandamela, the measure aims to “absorb excess liquidity in the banking system, which could generate higher inflationary pressure.”
The governor also announced that the inflation forecast had been “revised upwards”. In April, annual inflation stood at 4.4%, after 3.4% in March. “In the short and medium term, inflation is expected to accelerate, potentially reaching double digits depending on the duration of the conflict in the Middle East,” he warned.
