Banco de Moçambique again lowers reference rates

16 April 2012

The Banco de Moçambique has again lowered the reference rates, with the marginal lending facility cut by 25 basis points to 13.5%, Mozambique’s central bank announced in a statement released on Friday in Maputo.

At the Monetary Policy Committee meeting a decision was also made to cut the deposit facility by 50 basis points or a half percentage point to 3.0%, to reduce the compulsory reserve ratio by 25 basis points to 8.25% and to dry up liquidity to ensure that the circulating money supply at the end of April is no more than 34.5 billion meticais.

The marginal lending facility corresponds to the interest commercial banks pay for debt they contract with the Banco de Moçambique. The deposit facility is the interest the Banco de Moçambique pays commercial banks for deposits of their excess liquidity. The compulsory reserve ratio is the percentage of money that commercial banks must daily deposit in the central bank to safeguard against eventual shocks.

Reducing these rates causes an increase of available money in commercial banks as their liabilities with the central bank drop, resulting in higher financing margins for the economy. The lower key rates also lead to expectations that economic players will have less debt with banks.

This is the second downward intervention in key rates in the space of a month; the last one was implemented in mid-March. (macauhub)