Maputo — Meeting in Maputo on Monday, the Monetary Policy Committee of the Bank of Mozambique (CPMO) decided to cut the bank's reference interest rate, known as the MIMO rate, from 14.25 to 13.5 per cent.
This is the fifth cut in interest rates in the space of a year. In March, the MIMO rate was cut to 15.75 per cent, in May to 15 per cent and in July to 14.25 per cent.
In its press release announcing the decision, the CPMO said it was cutting interest rates again because of "the continued consolidation of the outlook for single-digit inflation in the medium term.'
According to the governor of Bank of Mozambique, Rogério Zandamela, speaking to reporters in Maputo, the reduction takes place at a moment when the assessment of the risks and uncertainties associated with the projections remains favorable.
The CPMO noted that the annual rate of inflation had fallen from three per cent in August to 2.8 per cent in September. The same trend, it added, could be seen in underlying inflation, which excludes fruit and vegetables, and goods whose prices are fixed by the government.
The prospects for single digit inflation (i.e. annual inflation of less than 10 per cent), it added, "essentially reflects the stability of the metical and the impact of the measures taken by the CPMO'.
The CPMO added that the central bank expects "moderate economic growth in the medium term' despite "the prevalence of uncertainties regarding the impact of climate shocks'.
Excluding liquefied natural gas (LNG), the gross domestic product (GDP) grew from 2.3 per cent in the first quarter of this year to 3.6 per cent in the second quarter. If LNG is included, growth in the same period was from 3.2 to 4.5 per cent.
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The meeting of the CPMO was preceded by a meeting of the central bank's Stability and Financial Inclusion Committee, which declared that from December 2022 to June 2024, the percentage of the adult population with access to digital financial services grew from 68.5 to 94.5 per cent.
The country's net international reserves remained at what the CPMO regarded as "comfortable levels', and were sufficient to cover five months of imports of goods and services.
The pressure on domestic public indebtedness remains high, warned the CPMO, and has now reached 402.7 billion meticais (about 6.3 billion US dollars), which is an increase of 90.3 billion meticais in comparison with December 2023.
The central bank hoped "to continue normalizing the MIMO rate in the medium term' - that is, more interest rate cuts are likely, but will depend on the prospects for inflation, and the assessment of the underlying risks and uncertainties
Zandamela also recognized that there is a shortage of foreign currency on the local market.
"In this market, there is a certain form of segmentation', he said. "Some banks have greater availability and greater comfort and there are those that have more difficulties. The banks that have problems must resort to the institutions that have a surplus of foreign currency. But they can do more and can seek international credit lines'.
