Maputo — The Monetary Policy Committee of the Bank of Mozambique (CPMO), at a meeting in Maputo on Monday decided to cut its benchmark interest rate, the MIMO rate, by 50 base points.

Thus, the MIMO rate fell from 12.75 to 12.25 per cent. A CPMO statement said this decision "arises from the continued prospects of single digit inflation over the medium term, despite the increased risks and uncertainties associated with the projections, notably those arising from the post-election tensions, fiscal risks and climatic shocks'.

At the same time the CPMO cut sharply the Compulsory Reserves Coefficient (the amount of money the commercial banks must deposit with the central bank) from 39 to 29 per cent for meticais and from 39.5 to 29.5 per cent for foreign currency. The statement from the CPMO said that this measure "seeks to make more liquidity available to support the economy in restoring its productive capacity and in the supply of goods and services'.

Towards the end of 2024, the inflation rate rose. According to the CPMO, annual inflation rose from 2.84 per cent in November to 4.15 per cent in December. This reflected a decline in the supply of goods and services, arising from the post-election riots.

Underlying inflation (which excludes fruit and vegetables, and goods with administered prices) also rose. Nonetheless, the CPMO was confident that the prospects for single digit inflation remain valid, and essentially reflect the stability of the metical and the impact of the measures taken by the CPMO.

The pressure on domestic indebtedness worsened, the CPMO added. In January, the internal public debt stood at 435.6 billion meticais (about 6.8 billion US dollars), which was an increase of 20.1 billion meticais on the December figure.

International reserves remained at what the central bank regarded as a "comfortable' level - enough to cover five months' worth of imports of goods and services, excluding the mega-projects.

The risks and uncertainties associated with the inflation projections have increased, the CPMO admitted. The factors that could lead to a rise in the inflation rate "are the impact of the post-election tensions, climatic shocks and worsened pressure on public expenditure, in a context of reduced capacity to finance the expenditure'.

________________________________