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The Monetary Policy Committee of the Bank of Mozambique (CPMO), meeting in Maputo on 26 January, decided to leave the bank’s main interest rate unchanged.
Thus, the Interbank Money Market Rate (MIMO), used by the central bank for its interventions on the interbank money market to regulate liquidity, remained at 13.25 per cent. The rate has held steady for a year, after it was raised by 300 percentage points in late January 2021.
According to a statement from the CPMO, this decision “is based on the slight improvement in the prospects for domestic inflation over the short and medium term, despite the worsening risks and uncertainties, notably those associated with fiscal pressure, with climate shocks, and with increased oil and food prices on the world market”.
The domestic uncertainties, it continued, included “the extension and magnitude of the effects of Covid-19 on the economy”, while on the international scene shadows were cast by “the worsening geopolitical tension in Europe”.
Nonetheless, the prospects for Mozambican inflation have been revised downwards, and remain less than ten per cent a year. Annual inflation fell slightly from 6.8 per cent in November to 6.7 per cent in December. Food prices fell slightly, while the Mozambican currency, the metical, held its value.
The CPMO forecast an improvement in economic activity in 2022, arising from the government’s relaxation of restrictive measures adopted to slow the spread of Covid-19, and from the start of the export of liquefied natural gas (LNG) from the Rovuma Basin, off the coast of the northern province of Cabo Delgado.
The floating LNG unit, operated by the Italian energy company ENI, and built in a South Korean shipyard, is now in position in the Rovuma Basin and should begin production by the second half of the year.
The return to economic growth, the CPMO warned, “will continue to require the deepening of structural reforms in the economy, seeking to strengthen institutions, improve the business environment, attract investment, and create jobs”.
Recent macroeconomic prospects, the CPMO concluded, “are consistent with keeping the current level of the MIMO rate in the short term to maintain low and stable inflation which is the main objective of the Bank of Mozambique”.
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