Mozambican reference interest rate records largest rise in 20 months

The rate calculated monthly by AMB and the Bank of Mozambique (BM) is based on a single indexer (calculated by the central bank), which rose to 17.2%, and a cost premium of 5.3% (defined by AMB), which remains unchanged.

This is the third rise this year: in May, the ‘prime rate’ had risen by 50 basis points, and in June, it increased by 150.

You must return to March 2021 to find a steeper rise than today.

At that time, the depreciation of the metical and the economic risks associated with Covid-19, cyclones, and armed violence caused a jump of 230 basis points.

The increases in the prime rate have been associated with the central bank raising the monetary policy interest rate (MIMO rate, which influences the formula for calculating the prime rate) to control inflation.

Year-on-year inflation was 12.01% in September, a slight slowdown of 0.09 percentage points from 12.1% in August, so small that it is more like saying that prices have stagnated.

Food, non-alcoholic beverages, and transport have been the goods and services that have contributed most to price increases in Mozambique.

The ‘prime rate’ creation was agreed upon in 2017 between the central bank and the AMB to eliminate the proliferation of reference rates in the cost of money.

At the time, it was launched at 27.75% and has been down 525 basis points since then.

The goal is for all lending operations to be based on a single rate “plus a margin (spread), which will be added to or subtracted from the ‘prime rate’ upon risk analysis” of each contract, according to the promoters.