The prime rate for credit operations in Mozambique will rise 150 basis points to 20.6 percent, effective this month, announced the Mozambican Association of Banks (AMB).
The rate calculated monthly by the AMB and the Bank of Mozambique (BM) is based on a single indexer (calculated by the central bank) which rises from 13.8% to 15.3% and a cost premium of 5.3% (defined by the AMB) which remains unchanged.
This is the second consecutive increase since the WB decided in late March to raise the monetary policy interest rate (MIMO rate, which influences the formula for calculating the ‘prime rate’) to control inflation.
The annual inflation rate in Mozambique rose to 7.9% in May, the highest value of the last four and a half years, but the WB expects it to remain at “a single digit (below 10%) in the medium term.
The ‘prime rate’ had been fixed at 18.6% since October 2021, rose to 19.1% in May and to 20.6% in June.
The creation of the ‘prime rate’ was agreed five years ago between the central bank and the AMB to eliminate the proliferation of reference rates on the cost of money. At the time it was launched at 27.75% and has fallen by 715 basis points since then.
The aim is for all credit operations to be based on a single rate, “plus a spread, which will be added to or subtracted from the prime rate depending on the risk analysis” of each contract, the promoters explained.
