Mozambique central bank further tighten, raises rate to curb inflation

MAPUTO, Mozambique, Capital Markets in Africa Mozambique’s central bank raised its benchmark policy rate to the highest in three years to help curb inflation and manage the metical, which exceeded forecasts and would impact the objectives for 2015 and 2016.

Bank of Mozambique raised the benchmark standing facility rate by 150 basis points to 9.75 percent, the Maputo-based institution said in an e-mailed statement on Monday. The bank, which has now hiked its policy rate by 225 basis points this year. Also, raised the deposit rate by 100 basis points to 3.75 percent while the reserve requirement, which was increased in November, was retained at 10.50 percent.

Governor Ernesto Gove said: “The monetary policy committee thought it was important to continue with the steps that, along with other economic policies that have been outlined, will help consolidate gains in foreign exchange and to help stop a possible quickening of inflation in 2016. These are essential to maintain macroeconomic and financial stability”.

Mozambique’s inflation rate rose to 6.27 percent in November from 4.74 percent in October while the metical fell sharply earlier this month although the central bank said information from commercial banks as of December 11 point to a slowdown in the depreciation of the metical.

The Governor revealed also that Mozambique’s net international reserves fell by US$207 million to US$1.948 billion, enough for 3.31 months of imports, reflecting net foreign currency sales by the central bank of US$113 million, payments abroad by the state of US$19.7 million and net losses from the gold and bonds worth Us$14.2 million.

The bank said the INE business confidence indicators again fell in October, reflecting negative opinions about job prospects, demand and prices, with all sectors apart from industrial production and housing expressing pessimism about the future.

To help the economy withstand increasing pressure, Mozambique’s government has turned to the International Monetary Fund for a loan of as much as US$286 million.

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