Maputo — The Bank of Mozambique has announced that it will keep its key interest rates unchanged for at least another month.
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.
This means that the Central Bank's interest rates have remained unaltered since October when the Standing Lending Facility was cut by 50 base points, from 8.75 to 8.25 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 44.657 billion meticais (about 1.46 billion US dollars) by the end of March.
Provisional figures for February show that the monetary base fell by 125 million meticais to 44.994 billion meticais. The Bank had been hoping for a larger decline: the monetary base was 100 million meticais larger than the forecast for the period.
The statement noted that, according to the consumer price index for the three major cities (Maputo, Beira and Nampula), the February inflation rate was 0.39 per cent (less than half the 0.98 per cent inflation rate of January). The yearly inflation rate - March 2013 to February 2014 - was 2.38 per cent.
As for exchange rates, the metical depreciated against both the US dollar and the South African rand.
On the Inter-Bank Exchange Market, the metical was quoted at the end of February at 30.64 to the dollar. This was a depreciation of 0.61 per cent over the month - considerably lower than the than the depreciation of only 1.7 per cent in January. Over the past year, the metical had depreciated by 2.17 per cent against the dollar.
The rand stopped weakening against the metical. At the end of February, the metical was quoted at 2.87 to the rand, which was a depreciation of 6.3 per cent. However, taking the past year as a whole, the metical had risen in value against the rand by 14.58 per cent.
Despite the interest rate signals from the central bank, the commercial banks have continued to charge their clients extortionate rates. Thus the average interest rate charged by the banks to their clients in January, for loans maturing in a year, was a shocking 19.81 per cent. Favoured clients could obtain a prime rate, and the average prime rate offered was 14.97 per cent.
Mozambique's net international reserves fell by 113 million dollars in February. At the end of the month, they stood at 2.792 billion dollars, enough to cover 4.1 months of imports of goods and nonfactor services.
The largest single factor in the decline was the sale by the central bank of 195 million dollars on the interbank exchange market. As in the previous month, most of this (111 million dollars) was to participate in payment for the country's imports of liquid fuels.
The Bank's statement concluded by noting that the recent floods in parts of the country had destroyed crops and made life difficult for thousands of Mozambican families. To mitigate the effects of the weather on the country's macro-economic indicators, the Bank thought it best “to stick to a prudent monetary policy”.