13 February 2014

Mozambique: Central Bank Keeps Interest Rates Unchanged

Maputo — Despite increased depreciation of the Mozambican currency, the metical, against the US dollar since the start of the year, the Bank of Mozambique has decided to keep its key interest rates unchanged.

Meeting in Maputo on Wednesday, the Bank's Monetary Policy Committee decided to keep the Standing Lending Facility (the interest rate paid by the commercial banks to the central bank for money borrowed on the Interbank Money Market) at 8.25 per cent.

The Standing Deposit Facility (the rate paid by the central bank to the commercial banks on money they deposit with it) remains at 1.5 per cent, and the Compulsory Reserves Coefficient - the amount of money that the commercial banks must deposit with the Bank of Mozambique - is also unchanged at eight per cent.

The Committee also decided that the central bank will intervene in the inter-bank markets in order “to ensure an adequate supply of foreign currency” and to guarantee that the monetary base does not exceed 44.884 billion meticais (about 1.47 billion US dollars) by the end of February.

Due largely to seasonal factors, the monetary base fell by 2.418 billion meticais (5.1 per cent) in January, and stood at 45.119 billion meticais at the end of that month.

The statement noted that, according to the consumer price index for the three major cities (Maputo, Beira and Nampula), the January inflation rate was 0.98 per cent (considerably higher than the 0.57 per cent inflation rate of December). The yearly inflation rate - February 2013 to January 2014 - was 3.16 per cent.

Preliminary figures on the debts of private companies to the Mozambican banking system show that they increased by over 1.2 billion meticais (0.8 per cent) in December.

The growth in the private sector debt over 2013 as a whole was 28.7 per cent.

The commercial banks have continued to ignore all the interest rate signals form the central bank, and charge their clients extortionate rates. Thus the average interest rate charged by the banks to their clients in December, for loans maturing in a year, was 20.22 per cent, only 0.03 per cent lower than in November.

As for exchange rates, the metical continued to depreciate against the US dollar and appreciate against the South African rand.

On the Inter-Bank Exchange Market, the metical was quoted at the end of January at 30.46 to the dollar. This was a depreciation of 1.7 per cent over the month - much higher than the depreciation of only 0.1 per cent in December. Over the past year, the metical had depreciated by 1.6 per cent against the dollar. The rate of depreciation has thus picked up very considerably.

But the rand has continued to weaken, and so by the end of January the metical was quoted at 2.76 to the rand. Against the rand, the metical had risen in value by 3.2 per cent in January, and by 18.6 per cent over the past year.

Mozambique's net international reserves fell by 90.5 million dollars in January. At the end of the month, they stood at 2.905, enough to cover 4.25 months of imports of goods and nonfactor services.

The largest single factor in the decline was the sale by the central bank of 120.5 million dollars on the interbank exchange market. 85.7 million dollars of this was to participate in payment for the country's imports of liquid fuels.

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