The benchmark interest rate for credit in Mozambique fell by another 0.1 percentage points in December to 19.7%, the ninth monthly cut since 2024, the Mozambican Banking Association (AMB) announced on Friday.
The rate, known as the “prime rate”, had been falling since 2018, to a low of 15.5% in February 2021, when the trend reversed and the rate began to rise until it reached 24.1% in July 2023.
The rate returned to the values of April 2023 (23.5%) in January 2024, after six consecutive months at highs of 24.1%. It then fell in March to 23.1%, in April to 22.7%, in May to 22.3%, in June to 22%, in July to 21. %, a figure that was maintained in August and September, falling in October to 20.5%, in November to 19.8% and in December to 19.7%.
Fluctuations in the prime rate are linked to the monetary policy interest rate (MIMO rate, which influences the formula for calculating the prime rate) used by the central bank to control inflation.
The Monetary Policy Committee (CPMO) of the Bank of Mozambique announced on Wednesday a further cut in the monetary policy interest rate, known as MIMO, from 13.5%, which has been in force since the end of September, to 12.75%.
“This decision is underpinned by the continued consolidation of the outlook for inflation in single digits in the medium term, despite the uncertainties regarding 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% since September 2022, following the central bank’s intervention, which then began consecutive cuts from 31 January, when it was reduced to 16.5%. On 27 March it cut it to 15.75%, on 27 May to 15%, on 31 July to 14.25% and on 30 September to 13.5%.
The Committee’s next meeting is scheduled for 27 January.
In the same statement, the central bank explains that “the inflation outlook remains at one digit in the medium term”, which “essentially reflects the stability of the metical and the impact of the measures taken by the CPMO”.
It also expects “moderate economic growth” in the medium term, recalling that in the third quarter of 2024, Gross Domestic Product (GDP) growth, excluding liquefied natural gas (LNG), stood at 2.8%, after 3.6% in the previous quarter.
“And it is expected to remain modest until the end of 2024. When LNG is included, GDP grew by 3.7%, after 4.5% in the previous quarter. Despite the prevalence of uncertainties regarding the impacts of post-election tension and climate shocks on agricultural production and various infrastructures, economic activity is expected to grow moderately in the medium term,” the statement reads.
Lusa
