Bank of Mozambique to reduce market liquidity by raising interest rates and required reserves

12 January 2011

Maputo, Mozambique, 12 Jan – The Bank of Mozambique has raised the country’s base interest rate on loans by 100 basis points from 15.5 percent to 16.5 percent in a decision made by the Monetary Policy Commission of the central bank Monday.

At the same time a decision was also made to raise the interest rate on deposits by 100 basis points to 5 percent, and the required reserve rate by 25 basis points to 9 percent, both rises due to be applied on 7 February.

The permanent loan liquidity facility allows financial institutions to get liquidity from national central banks on an “overnight” basis, against eligible assets and the permanent deposit facility can be used by the same institutions to set up “overnight” deposits with national central banks.

In its turn, the the Required Reserve Rate is the minimum level of reserves that financial institutions are obliged to maintain in their accounts at central banks.

The central bank said that the rates rises were intended to serve as anti-cyclical measures to control price rises in 2011, as it had observed signs of Mozambican economy, “even with a favourable outlook for the metical exchange rate.” (macauhub)