Mozambique’s benchmark interest rate will rise in March from 15.5% to 17.8%, a 2.3% increase, the highest since it was created in June 2017, the banks association and the central bank announced today.
The ‘prime rate’ is always published at the end of each month, to take effect the following month.
The calculation of the value in March reflects the January decision of the Monetary Policy Committee (CPMO) of the Bank of Mozambique to increase the monetary policy interest rate, MIMO rate, by 300 basis points, to 13.25%.
The MIMO rate is part of the benchmark interest rate formula.
In January, the CPMO’s decision was supported by a “substantial upward revision of the inflation outlook for the medium term” reflecting “the continued depreciation of the metical in an environment of increased risks and uncertainties.”
The uncertainties include “the negative consequences of the accelerated spread of covid-19 and the occurrence of natural calamities, in addition to military instability” in the center and north of the country.
The creation of the ‘prime rate’ with an initial value of 27.75% was agreed between the central bank and the Mozambican Association of Banks (AMB) in June 2017 to eliminate the proliferation of reference rates on the cost of money.
The aim is for all credit operations to be based on a single rate, “plus a spread, which will be added to or subtracted from the prime rate through risk analysis” of each contract, the promoters explained.
