Mozambique: Prime lending rate to remain at 20.6% in October for fifth month

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Mozambique: Prime lending rate to remain at 20.6% in October for fifth month

1:47 CAT | 30 Sep 2022

in file CoM

The prime rate for credit operations in Mozambique will remain at 20.6 percent in October, the fifth consecutive month that it has had the same value, the Mozambican Association of Banks (AMB) said on Friday.

READ: Just in: Bank of Mozambique raises MIMO rate from 15.25% to 17.25% – Watch

The rate is calculated monthly by the AMB and the country’s central bank, the Bank of Mozambique (BM) based on a single index (calculated by the central bank) set at 15.3 percent and a cost premium of 5.3 percent (set by the AMB). Both of these elements are unchanged in October.

In May, the prime rate had risen by 50 basis points and in June it rose by 150, to its current value.

Those previous increases were linked to the rise in the BM’s monetary policy interest rate – the MIMO rate – which had been raised in order to control inflation.

Year-on-year inflation in Mozambique in August was 12.1 percent, the highest rate for four years and 11 months, the National Statistics Institute (INE) said, citing food, non-alcoholic beverages and transport as the goods and services that have contributed most to price rises in Mozambique.

The creation of the prime rate was agreed in 2017 between the central bank and AMB, in a bid to eliminate the proliferation of benchmark rates for the cost of money.

At the time, it was launched at 27.75 percent, but 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 to be added or subtracted from the prime rate “upon risk analysis” of each contract, its creators have explained.

Source: Lusa