Mozambique’s Central Bank, Banco de Moçambique, last week announced it would keep its benchmark interest rate unchanged at 17.25 per cent for the sixth consecutive month.

The Bank of Mozambique hiked the benchmark rate back in September 2022 from 15.25 to 17.25 per cent, a measure which the bank said intended to bring inflation down to a single digit in the medium term – at the time, the bank had registered a 12.1 per cent annual inflation in August, up from 11.8 per cent in July. By March 2023, annual inflation stood at 10.30 per cent up from 9.78 per cent.

However, keeping inflation at a single-digit is likely to prove tricky not least because of spikes in oil prices following a recent announcement by the Organisation of the Petroleum Exporting Countries (OPEC) that they would cut output.

Brent crude, the global benchmark, jumped 5.31 per cent to $84.13 a barrel. According to oil market watchers, this was the steepest price rise in a year.

Enter the Mozambican Association of Oil Companies (AMEPETROL). On 4 March, AMEPETROL issued a statement saying that it noted with concern the measure adopted by OPEC because it will have a direct impact on the domestic market, warning clients that following months will be challenging to the domestic market in terms of prices – this means that AMEPETROL is likely to follow its cue from the international markets.

A hike in petrol prices is likely to push inflation upwards, putting paid to Banco de Moçambique’s efforts to curb inflation to a single-digit.

This is going to cause added stress to the economy and drive all projections downwards, especially because the cuts in oil output are likely to last through the end of the year.

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