Mozambique’s benchmark interest rate in March is set to rise from 15.5% to 17.8%, an increase of 2.3%, the highest since it was created in June 2017, the association of banks and the central bank announced.
The calculation of the value in force in March reflects the January decision of the Monetary Policy Committee (CPMO) of the Bank of Mozambique to increase the monetary policy interest rate, also known as ‘MIMO rate’, by 300 basis points, to 13.25%.
The MIMO rate is one that is part of the reference interest rate formula.
In January, the CPMO’s decision was supported by a “substantial upward revision of inflation prospects for the medium term” that reflect “the continued depreciation of the metical, in an environment of greater worsening of risks and uncertainties”.
Uncertainties include “the negative consequences of the accelerated spread of covid-19 and the occurrence of natural disasters, in addition to military instability” in the center and north of the country.
The creation of the ‘prime rate’ with an initial value of 27.75% was agreed between the central bank and the Mozambican Banking Association (AMB) in June 2017 to eliminate the proliferation of interest rates in the cost of money.
The objective is that all credit operations are based on a single rate, “plus a margin (spread), which will be added to or subtracted from the ‘prime rate’ through the risk analysis” of each contract.