The Monetary Policy Committee of the Bank of Mozambique (CPMO), meeting in Maputo last week, decided to leave the Bank’s benchmark interest rate, the Monetary Policy Rate (MIMO), unchanged, at 17.25 per cent.
A statement from the CPMO said this decision is based on maintaining the prospects for annual inflation of less than ten per cent, despite the worsening of some of the risks associated with projections for inflation, such as natural disasters and increased pressure on public expenditure.
The risks and uncertainties that underlie inflation projections have worsened, the CPMO says. “Domestically, there stand out uncertainties with regard to the impact of the recent climate shocks on the prices of goods and services in the short term”, the statement warned. “Externally, there stand out uncertainties about the effects of the volatility on the global financial markets, and the continuation of the conflict between Russia and Ukraine”.
The CPMO noted that annual inflation rose from 9.78 per cent in January to 10.3 per cent in February, largely reflecting the increase in food prices due to natural disasters. But underlying inflation (excluding the prices of fruit and vegetables, and administered prices) “remains stable”.
The CPMO is thus optimistic that annual inflation will fall to below ten per cent, thanks to the central bank’s policy measures, exchange rate stability, and the trend to reduced commodity prices on the world market.
Economic growth is expected to be slower than initially forecast, due to the impact of the recent natural disasters. The one exception to this slowdown is the natural gas projects in the Rovuma Basin in the far north.
The CPMO noted that the country’s domestic debt has continued to grow and stood at 301.3 billion meticais (about 4.7 billion US dollars, at the current exchange rate). This was an increase of 26.1 billion meticais in comparison with December 2022.