Inflation slows in Mozambique on sale of foreign currency and rise in interest rates

13 July 2006

Maputo, Mozambique, 12 July – Mozambique’s inflation rate slowed last month, to 4.85 percent, due to the effects of sale of foreign currency and interest rates rises, both measures applied by the bank of Mozambique, officials said.

According to figures published by the banking market regulator, the consumer price index fell by 0.19 points last month in comparison to the 4.77 percent posted in May.

The central bank said the drop was due to “the aggressive sale of foreign currency to commercial banks, in an effort to contain inflation.”

In the first half of the year, the bank sold foreign currency to the value of US$263 million, or 18 percent more than in the same period of last year.
With the same aim, interest rates were raised this year from 13 percent to 19 percent.

The calculation method for the consumer price index was also changed by the country’s National Statistics Institute, which also contributed to the fall in inflation.

In 2004, Mozambique’s inflation rate was 9.1 percent, but in 2005 it rose to 14 percent against a government forecast of 8 percent.

This year the central bank expects inflation to total between 7 percent and 8 percent.

In order to contain speculation and price increases the Mozambican government has said it is preparing to fix the price of essential food items.

According to figures published by the Bank of Mozambique, in the first half of 2006 the local currency, the metical, fell and average of 5.98 percent against the US dollar and the South African rand.