Bank of Mozambique cuts benchmark interest rate to 15.75%

The Bank of Mozambique (BdM) announced a reduction in the benchmark interest rate from 16.50% to 15.75%, the second decrease this year, justifying the measure with “the consolidation of the outlook for single-digit inflation”. The decision was announced by the governor of the BdM, Rogério Zandamela, after the meeting of the Monetary Policy Committee (CPMO) of the financial regulator.

Zandamela explained that the reduction in the reference interest rate, known as the MIMO rate, was underpinned by the consolidation of the outlook for single-digit inflation in the medium term, in a context of a favorable assessment of the risks and uncertainties associated with the projections.

This is the second time this year that the CPMO has cut the MIMO rate. In January, the rate was cut from 17.25% to 16.50%. In February, inflation in Mozambique fell to 4%, after reaching 4.2% in January, mainly reflecting the stability of the metical and the impact of the measures taken by the CPMO.

For the medium term, moderate economic growth is expected to continue, excluding the liquefied natural gas (LNG) sector. In the fourth quarter of 2023, Gross Domestic Product (GDP) reached 3.6%, better than the 3.3% in the previous quarter. However, the pressure on domestic debt remains high, standing at 344 billion meticais (4.9 billion euros), an increase of 31.7 billion meticais (459 million euros) compared to December 2023. Inflation projections remain favorable, due to the fiscal consolidation effort.