Bank of Mozambique hikes benchmark interest rates

MAPUTO, Mozambique, Capital Markets in Africa — The Bank of Mozambique has decided to increase key interest rates, and the marginal lending facility was increased by 100 basis points to 10.75 percent and the deposit facility by 50 basis points to 4.25 percent, the central bank said in a statement released after the Bank’s Monetary Policy Committee on Monday.

This is the highest interest the Bank of Mozambique has charged since September 2012. The rate then fell gradually, reaching 7.5 per cent in November 2014. It remained at that level for a year, but three rate rises in October, November and December 2015 brought it back up to 9.75 per cent. That rate held in January, but now the upward trend has resumed.

The Monetary Policy Committee reason for the increase to “the probable impacts of the adverse international conjuncture, as well as the expected effects of drought in the south and centre of the country and floods in the north”. In addition, the Mozambican Gross Domestic Product was growing at less than the initial forecast, while “projections for domestic inflation show the prevalence of pressure in the short and medium terms”.

Also, the central bank stated that reserve requirements remained at 10.5 percent and there would be an intervention in the interbank market in order to ensure the money supply in February would not exceed 68.163 billion meticais.

Furthermore, the same statement said that at the end of January the exchange rate of the metical against the dollar was 46.06 meticais, equivalent to a monthly depreciation of the metical of 2.47 percent, with annual depreciation slowing slightly to 42.25 percent. The balance of net international reserves had been reduced by US$124.5 million to US$1.869 billion, mainly reflecting the effect of net sales by the Bank of Mozambique in the interbank foreign exchange market worth US$130 million. 

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