Maputo, 1 Jun (AIM) – Meeting in Maputo on Wednesday, the Monetary Policy Committee of the Bank of Mozambique (CPMO) decided not to increase its reference interest rate, but did hike the Compulsory Reserve Coefficients – that is, the percentage of client deposits, that the commercial banks must deposit with the central banks.
For deposits in Mozambican currency the coefficient rises from 28 per cent to 39 per cent, and for foreign currency, it rises from 28.5 per cent to 39.5 per cent.
A statement from the CPMO says that these large increases are intended “to absorb the excessive liquidity in the banking system, which has the potential to generate inflationary pressures”.
But the CPMO opted to keep the bank’s benchmark interest rate, MIMO, at 17.25 per cent. This decision, the statement said, “is sustained by the prevalence of high risks and uncertainties associated with the projections for inflation, despite the prospects for single digit (less than ten per cent) annual inflation in the medium term”.
The underlying risks, it continued, include continued pressure on public expenditure, in a context of weak collection of revenue”. There is also uncertainty about prices determined by the State, particularly the prices of liquid fuels.
Outside of Mozambique, the uncertainties include the effects of the Russian invasion of Ukraine, the dynamic of commodity prices and the volatility of financial markets.
Nonetheless the CPMO is optimistic that inflation will continue to fall. In April, annual inflation fell to 9.6 per cent “reflecting the reduction in food prices on the world market, and the favourable evolution of the exchange rate of the metical”.
Single digit inflation in the medium term was possible, it claimed, thanks to “the measures taken by the CPMO, continued exchange rate stability, and the trend to a reduction in the prices of imported goods on the international market”.
The CPMO expected “moderate economic growth”. In the first quarter of 2023, Mozambique’s gross domestic product grew by 4.2 per cent. The statement attributed this to “the good performance of the extractive industry”. Over 2023 and 2024, the extractive industry is expected to continue contributing to accelerated growth.
(AIM)
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