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The Monetary Policy Committee of the Bank of Mozambique (CPMO), meeting in Maputo on Friday, has chosen to maintain the Bank’s primary interest rate at its current level.
This means that the Monetary Policy Interest Rate (MIMO) will remain at 17.25 percent, with no changes anticipated until the next scheduled CPMO meeting in late November.
A statement released by the CPMO explained that the decision not to raise interest rates further was made due to “heightened risks and uncertainties associated with inflation projections,” despite forecasts indicating that annual inflation will remain below ten percent in the medium term.
Mozambique has witnessed a decline in annual inflation, dropping from 5.7 percent in July to 4.9 percent in August. This decrease is attributed by the CPMO to lower food prices, facilitated by an unusually extended cool season and a stable exchange rate for the metical.
Nevertheless, underlying risks persist, including pressure on public spending and uncertainty regarding the impact of extreme weather events. Additionally, the ongoing conflict between Russia and Ukraine and recent increases in global fuel prices are factors that could potentially reverse the current inflation trend, as cautioned by the CPMO.
In the second quarter of 2023, Mozambique’s gross domestic product (GDP) registered a 4.7 percent growth, primarily driven by the extractive industry, particularly natural gas production. The country has begun exporting liquefied natural gas from a floating platform in the Rovuma Basin, situated off the northern province of Cabo Delgado.
Even when excluding the impact of natural gas projects, the outlook suggests continued economic recovery, notwithstanding challenges posed by climatic shocks affecting agricultural production.
The CPMO has issued a warning regarding the ongoing rise in public debt. As of now, domestic public debt stands at 321.1 billion meticais (equivalent to approximately five billion US dollars at the current exchange rate), marking an increase of 46 billion meticais compared to the December 2022 figure.
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