Central Bank reduces interest rates

Maputo, 31 May (AIM) – The Monetary Policy Committee of the Bank of Mozambique (CPMO), meeting in Maputo on Friday, reduced the bank’s benchmark interest rate, the MIMO rate, by 75 base points, from 11.75 per cent to 11 per cent.

A CPMO statement said this decision “arises essentially from the continued prospects of single digit inflation over the medium term, reflecting in part the favourable trend of international prices for goods and services, despite the high risks and uncertainties associated with the projections domestically”.

The CPMO said that the annual rate of inflation had fallen from 4.8 per cent in March to four per cent in April. Underlying inflation, which excludes fruit and vegetable, and goods with administered prices, had also fallen.

The CPMO was confident that the prospects for single digit inflation in the medium term remain valid, reflecting the stability of the metical, the impact of the measures taken by the CPMO, and the international trend for a reduction in the prices of goods and services.

The CPMO statement also declared that the banking sector “remains solid, capitalised and resilient”. In March, the solvency ratio of the sector was 26.5 per cent, much higher than the regulatory minimum of 12 per cent. The liquidity ratio was 59.5 per cent, also well above the regulatory minimum (of 25 per cent).

The Mozambican banks “have sufficient capital reserves to absorb potential losses and remain solid and capitalised in the medium term”, declared the CPMO.

Interest rates in the money market are continuing to fall, in line with the CPMO decisions, the statement claimed.

Nonetheless, there remain risks and uncertainties associated with the projections for inflation. The CPMO warned that the worsening fiscal situation “in a context of growing challenges for the mobilisation of financial resources for the State Budget”, as well as climate shocks, could lead to an increased rate of inflation.
(AIM)
Pf/ (320)