The reference interest rate for credit in Mozambique will fall by 0.1 percentage points in December, to 19.7%, the Mozambican Banking Association (AMB) announced on Friday (29). This is the ninth monthly cut since 2024, which represents financial relief for those who resort to credit in the country.
This rate, known as the ‘prime rate’, had been falling since 2018, reaching a low of 15.5 per cent in February 2021. A few months later, the trend reversed and the rate began to rise until it reached 23.50 per cent in April last year, rising to 24.10 per cent in July and remaining the same in all the following months,’ explained a Lusa publication.
Meanwhile, in January 2024, the rate fell again, after six consecutive months of peaking at 24.10%, having settled at 23.50% in February, falling in March to 23.10%, in April to 22.70%, in May to 22.30%, in June to 22%, in July to 21.2% (a figure that was maintained in August and September), in October it fell to 20.5%, in November to 19.8% and in December it should settle at 19.7%.
Fluctuations in the prime rate are directly linked to the monetary policy interest rate, known as the MIMO rate, adjusted by the BoM to control inflation.
The Monetary Policy Committee (CPMO) of the Bank of Mozambique had already announced on Wednesday (27) a further cut in the monetary policy interest rate, known as MIMO, from 13.5% (in force since the end of September) to 12.75%.
‘This decision is underpinned by the continued consolidation of the outlook for single-digit inflation in the medium term, despite uncertainties about the duration of the post-election tension and its impact on the prices of goods and services,’ the Bank of Mozambique said in a statement after the CPMO meeting, which is held every two months.
The key interest rate had been set at 17.25 percent since September 2022, after intervention by the central bank, which then began consecutive cuts from 31 January, when it was reduced to 16.5 percent. On 27 March it was cut to 15.75%, on 27 May to 15%, on 31 July to 14.25% and on 30 September to 13.5%.
The creation of the ‘prime rate’ was agreed in 2017 between the central bank and AMB to eliminate the proliferation of reference rates on the cost of money. At the time, it was launched at 27.75 per cent.
The aim is for all credit operations to be based on a single rate, ‘plus a margin (spread), which will be added to or subtracted from the prime rate by analysing the risk’ of each contract.
