The Monetary Policy Committee of Mozambique’s Reserve Bank (Banco de Mocambique) kept its benchmark interest rate unchanged at 10.25 percent for the fifth consecutive month, citing prospected price rises and high risk due to the uncertainties surrounding the pandemic and the conflicts in the country’s northern region to support its decision.
“Expenditures related to Security and Defence and Social support to the affected population by the military instability in the north and central regions of the country, as well as prospected costs related to the logistical challenges presented by the administration of Covid-19 vaccines increase concerns over our fiscal strategy for 2021. It is thus expected that the Government continues to source financing through its domestic debt mechanisms”, reads the statemente by the Bank of Mozambique.
The bank also stated that structural reforms are needed in order to achieve a more solid and sustainable economic growth, and stressed that it expects that the Mozambican GDP will see a slight increase in 2021, mainly pushed by the ongoing natural gas projects in the country and by the revitalisation of Mozambican exports, encouraged by the release of Covid-19 vaccines come the new year.
Also read: Fitch maintains Mozambique at ‘CCC’
Mozambique’s international reserves were at US$ 3,98B, which amounts to a little over six months of the country’s imports of goods and services, while its currency, the Metical, is further depreciating against the dollar, as a consequence of the uncertainties the Bank considers the domestic economy faces.
The Bank also predicts that inflation will rise slightly, but will stay below the two-digit mark.
Summary of Mozambique’s key interest rates (unchanged):
Interbank Money Market Rate (MIMO): 10.25%
Standing Deposit Facility: 7.25%
Standing Lending Facility: 13.25%
