Consultancy Oxford Economics Africa on Thursday said that Mozambique’s central bank would this year increase the key interest rate to 14%, up 75 percentage points, because of global credit conditions and rising inflation.
“Given that we recently increased our forecast for inflation in Mozambique significantly, from 5.4% to 7.3%, and considering the expected tighter monetary policy this year, we anticipate that the central bank of Mozambique will increase the key interest rate by 75 points, to 14%, in 2022,” the consultancy’s comment on Mozambican monetary policy reads.
Last week, the Monetary Policy Committee (CPMO) of the Bank of Mozambique decided to maintain the monetary policy interest rate (MIMO rate) at 13.25%.
“This decision is supported by the slight improvement in the prospects of domestic inflation in the short and medium term, despite the worsening of risks and uncertainties,” the central bank says in a statement, presenting as the main risks fiscal pressure, climate shocks in the country and increase in oil and food prices on the international market.
“The central bank maintained an exceptionally high interest rate to balance the high risks to inflation and the dismal investment environment,” Oxford Economics writes in the note sent to customers, to which Lusa has had access.
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The Bank of Mozambique predicts “a lesser acceleration of inflation”, a reflection of “the stability of the metical, despite the prospects of rising prices for food and oil on the international market”, the bank’s note says, which comes after the National Statistics Institute registered inflation of 6.7% last year.
“The prospects for improving economic activity in 2022 are also maintained,” thanks to “the relaxation of measures to contain the spread of Covid-19, the execution of natural gas projects in the Rovuma basin and the greater dynamics of the external sector”.
As in previous communiqués, the central bank warns of the need for “structuring reforms in the economy” and states that “domestic public debt has increased”.
In December 2021, domestic public debt, excluding loan and lease agreements and arrears, “increased by 2.4 billion to 220.6 billion meticais”, around €3 billion.
The next ordinary CPMO meeting is scheduled for March 30.