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Home Africa

Mozambique Central Bank holds interest rates steady

Staff by Staff
December 16, 2019
in Africa, Banking, Economy, Finance, Mozambique
Reading Time: 2 mins read
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The Monetary Policy Committee of the Bank of Mozambique (CPMO), meeting in Maputo on Thursday, decided to hold the bank’s key interest rates at their current levels.

Thus the Interbank Money Market Rate (MIMO), used by the central bank for its interventions on the interbank money market to regulate liquidity, remains at 12.75 per cent.

The Standing Lending Facility (the interest rate paid by the commercial banks to the central bank for money borrowed on the Interbank Money Market) remains 15.75 per cent, while the Standing Deposit Facility (the rate paid by the central bank to the commercial banks on money they deposit with it) remains 9.75 per cent.

There is also no change in the compulsory reserves coefficient, the amount of money that the commercial banks must deposit with the Bank of Mozambique. This is still 36 per cent for foreign currency, and 14 per cent for local currency.

A statement for the CPMO said the decision to leave the MIMO rate unchanged “is based on the prevalence of high risks and uncertainties”, which might reverse the current situation of low inflation.

Furthermore, military instability had worsened in parts of the country – the CPMO was referring to the islamist insurgency in the northern province of Cabo Delgado, and to the ambushes against trucks and buses in the central provinces of Manica and Sofala, attributed to the self-styled “Renamo Military Junta”.

That military instability, the statement said, accompanies “the greater likelihood of climate shocks”, and the international geo-political and trade tensions “with negative implications for the volume of global trade and the dynamic of commodity prices”.

Under these circumstances, the CPMO thought it prudent not to cut interest rates further.

Inflation, the statement said, remains low. The latest figures from the National Statistics Institute (INE) showed that in November, Mozambique’s annual inflation rate was 2.58 per cent (up from 2.01 per cent in September).

Mozambique’s international reserves remained at “comfortable levels”, said the CPMO. In the first week of December, the gross international reserves reached 3.661 billion US dollars, enough to cover six months of imports of goods and services, excluding transactions of the foreign investment financed mega-projects.

The CPMO preedicted that economic activity will recover in 2020, but will still remain below its potential. The annual growth in the gross domestic product was only two per cent in the third quarter of 2019, but is expected to improve next year. This optimism is based partly on reconstruction in the provinces hit by cyclones Idai and Kenneth in March and April this year, partly on the State paying off its debts to domestic suppliers, and partly due to implemention of projects related to the vast reserves of natural gas discovered in the far north.

The CPMO statement concluded with a promise that it will continue monitoring risk factors and “will not hesitate to take the necessary corrective meaures”, even before its next ordinary meeting, scheduled for late February.

Source: AIM via Club of Mozambique

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Tags: Bank of MozambiqueCabo DelgadoCPMOCyclone IdaiCyclone KennethGDPGross Domestic ProductINEinterbank money marketInterbank Money Market RatemanicaMaputoMIMOMonetary Policy Committee of the Bank of MozambiqueMozambiqueNational Statistics InstituteRenamo Military JuntaSofalaStanding Deposit FacilityStanding Lending Facilityмозамбикموزمبيقモザンビーク莫桑比克
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