Maputo, 28 May (AIM) – The Monetary Policy Committee of the Bank of Mozambique (CPMO), meeting in Maputo on Monday, announced a further cut in its main interest rate of 75 base points.
Thus the bank’s Monetary Policy Rate (MIMO) falls from 15.75 to 15 per cent.
A statement from the CPMO said the decision to cut interest rates “is supported by the continued consolidation of the prospects for single digit inflation in the medium term, in a context where the assessment of the risks and uncertainties associated with the projections remains favourable”.
Prior to the meeting of the CPMO, the central bank’s Committee on Stability and Financial Inclusion also met. The statement said the Committee “assessed the evolution of systemic risk and the main vulnerabilities, and concluded that the national financial system remains stable and resilient”.
The CPMO was optimistic about the prospects for single digit (i.e. less than ten per cent) inflation, despite a slight jump in the annual inflation rate in April. Inflation rose from three per cent in March to 3.3 per cent in April.
Underlying inflation, which excludes fruit and vegetables, and goods with administered prices, remained stable, the CPMO said. It claimed that single digit inflation “reflects the stability of the metical, and the impact of the measures taken by the CPMO”.
A further favourable factor, it said, was “the less serious impact of geopolitical conflicts on the logistical chain and the prices of goods on the international market”.
Mozambican banks, the CPMO added, “remain solid, capitalized and resilient”. In March the solvency ratio of the banking sector was 25.1 per cent, much higher than the regulatory minimum of 12 per cent. The liquidity ratio was 50.2 per cent, also way above the regulatory minimum of 25 per cent.
“Systemic risk, which assesses the potential effect of contagion arising from disturbances in the banking system, is moderate”, said the CPMO. “This reflects the gradual recovery of economic activity, the stability of the metical, and the recent evolution of inflation, despite the increased exposure of the banking sector to public indebtedness”.
Domestic public debt now stands at 361.8 billion meticais (about 5.7 billion US dollars, at the current exchange rate), which is an increase of 49.5 billion meticais when compared to the figure of December 2023.
The CPMO promises that it will continue to “normalize” the MIMO interest rate “over the medium term”. But the pace and size of any further cuts in interest rates “will continue to depend on the prospects for inflation and on assessment of the risks and uncertainties underlying the medium term projections”.
(AIM)
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