Communication - Presse

Central bank reduces interest rates

The Monetary Policy Committee of the Bank of Mozambique (CPMO), meeting in Maputo on Wednesday, reduced the bank’s benchmark interest rate, the MIMO rate, by 50 base points, from 12.25 to 11.75 per cent.

A CPMO statement said this decision “arises essentially from the continued prospects of single digit inflation over the medium term, despite the increased uncertainties about the effects of the worsening of the fiscal risk”.

The CPMO said that, in late 2024, the annual rate of inflation had continued to rise, albeit slowly, from 2.84 per cent in November to 4.15 per cent in December. This year, annual inflation rose to 4.69 per cent in January and to 4.74 per cent in February.

Underlying inflation (which excludes fruit and vegetables, and goods with administered prices) remained stable. The CPMO was confident that the prospects for single digit inflation in the medium term remain valid, reflecting the stability of the metical and the impact of the measures taken by the CPMO.

Excluding liquefied natural gas (LNG), the CPMO forecast “moderate economic growth”. The country’s GDP, excluding LNG, had shrunk by 3.1 per cent in the last quarter of 2024, after a growth of 2.8 per cent in the previous quarter. When LNG is included, the GDP contracted by 4.9 per cent in the last quarter of 2024, after a growth of 3.7 per cent in the previous quarter.

The CPMO expected that economic activity, excluding the production of LNG, “will gradually recover, despite the uncertainties about the impact of climate shocks on agriculture and on infrastructure, and the effects of the post-election tensions”.

The pressure on domestic indebtedness had continued to worsen, the CPMO added. The internal public debt stood at 447.2 billion meticais (about seven billion US dollars), which was an increase of 31.7 billion meticais on the December 2024 figure.

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 in the medium term included “the impact of the worsening fiscal risk, in a context of growing challenges for the mobilisation of financial resources, and the effects of climate shocks and the post-election tensions on the prices of goods and services”.

Source: https://clubofmozambique.com/news/mozambique-central-bank-reduces-interest-rates-278807/