Banco de Moçambique, Mozambique’s central bank, on Wednesday kept its benchmark interest rate unchanged at 17.25 per cent for the sixth month running.
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.
Fast forward to March 2023, annual inflation stands at 10.30 per cent up from 9.78 per cent.
According to a statement issued by the Bank of Mozambique’s Monetary Policy Committee (CPMO) and signed by the bank’s governor, although it warns of risks and uncertainties associated with inflation projections, the bank still foresees a return to single-digit inflation for the medium term and moderate economic growth.
Comment
Even if the Bank of Mozambique had lowered the benchmark rate, borrowing costs would still be high as commercial banks rarely follow the bank’s cue.
Observers argue that the Bank of Mozambique is being too optimistic with regards to bringing inflation down to a single digit, not least because of government’s own Economic and Social Plan and State Budget (PESOE) projects an annual inflation of 11.5 per cent.
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