Bank of Mozambique raises interest rates to contain inflation

14 June 2016

The Bank of Mozambique has revised benchmark interest rates upwards, increasing the marginal lending facility by 1.50 percentage points to 14.25 percent, the bank said Monday in a statement on the decisions of its Monetary Policy Committee.

The interest rate on the deposit facility was also increased by 1.50 percentage points to 7.25 percent, and the committee decided to keep reserve requirements unchanged at 10.5 percent in local currency and 15 percent in foreign currency.

The central bank explained these changes in key interest rates were based on short and medium term forecasts of economic downturn and persistent pressure from the general rise in prices of products and basic services.

In the statement the Bank of Mozambique also mentioned continued exchange rate pressure due to suspension of foreign aid by cooperation partners and political and military tension, all of which are affecting macroeconomic fundamentals in the short and medium term.

At the end of May, the country’s foreign reserves fell by US$80.3 million to US$1.7138 billion, providing 3.1 months’ coverage of goods and services imports, excluding large projects.

On the last day of May the exchange rate against the dollar reached 58.22 meticais, or a depreciation of Mozambique’s currency of 9.42 percent in one month and 68.61 percent over the previous 12 months. (macauhub/MZ)