Maputo — The Monetary Policy Committee of the Bank of Mozambique (CPMO), meeting in Maputo on Wednesday, announced a cut in its main interest rate of 75 base points.

Thus the bank's Monetary Policy Rate (MIMO) falls from 16.5 to 15.75 per cent.

According to a CPMO release, "this decision is supported by the consolidation of the prospects for single digit inflation over the medium term, in a context where the assessment of risks and uncertainties associated with the projections remains favourable'.

The target of single digit (i.e. less than ten per cent) inflation is modest. The annual inflation rate has continued to drop gradually, falling from 4.2 per cent in January to four per cent in February.

Underlying inflation, which excludes fruit and vegetables and goods with administered prices, has also slowed down, the CPMO adds. The prospects for low inflation, it says "are based on the stability of the metical and the impact of the measures taken by the CPMO'.

The CPMO release forecast "continued moderate economic growth, excluding the liquefied natural gas (LNG) projects'. Economic growth in the final quarter of 2023, again excluding LNG, is estimated at 3.6 per cent, after 3.3 per cent in the third quarter.

But when LNG is included, the GDP growth rate rose by 5.4 per cent. "In the medium term', says the CPMO release, "it is forecast that economic activity, excluding LNG production, will continue to recover, despite uncertainties about the impact of climate shocks on agriculture and infrastructures'.

The CPMO warned of "high pressure on domestic public indebtedness'. The domestic debt now stands at 344 billion meticais (about 5.4 billion US dollars, at the current exchange rate), an increase of 31.7 billion meticais when compared with the figure for December 2023.

The CPMO promises to continue "normalizing' the MIMO rate - but the scale of further interest rate cuts would depend on the prospects for inflation and assessment of the underlying risks and uncertainties.