Mozambique Raises Benchmark Rate to 14.25% to Contain Inflation

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Mozambique’s central bank raised its key rate for a third time this year as a weakening currency led to soaring inflation in the southern African nation.

Policy makers increased the benchmark policy rate by 150 basis points to 14.25 percent, the Maputo-based institution said in a statement on Monday. The interest rate on the standing deposit facility was raised to 7.25 percent from 5.75 percent.

The annual inflation rate in the cash-strapped nation rose to 18.3 percent in May after food prices jumped by about a third. The metical is Africa’s second-worst performing currency this year, weakening 17 percent against the dollar.

Ernesto Gove, Governor of the Bank of Mozambique
Ernesto Gove, Governor of the Bank of Mozambique

The monetary policy committee acted to contain inflationary pressures, Governor Ernesto Gove said in a statement on the central bank’s website.

The fallout of the global commodity-price slump on Mozambique’s economy has been exacerbated by mounting public debt. The nation owes $11.6 billion to creditors, according to its finance ministry, and some state-owned companies have struggled to keep up with payments.

The country is the continent’s biggest producer of coking coal, which is used in steel production, International Energy Agency data show, and is the site of one of the world’s largest natural gas fields.

Source: Bloomberg