Mozambique: Prime rate rises from 22.5% to 22.6% in December

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Mozambique: Prime rate rises from 22.5% to 22.6% in December

4:13 CAT | 02 Dec 2022

File photo: Folha de Maputo

The reference interest rate (‘prime rate’) for credit operations in Mozambique rose from 22.5% to 22.6% at the start of December, the Mozambican Association of Banks (AMB) has announced.

The rate, calculated monthly by the AMB and the Bank of Mozambique, is based on a single index, calculated by the central bank, which rose from 17.2% to 17.3%, plus a cost premium of 5.3% defined by AMB, which remains unchanged.

Increases in the prime rate have in the past been associated with a rise in the monetary policy interest rate (MIMO) rate, which influences the formula used by the central bank to calculate the prime rate in order to control inflation.

The Monetary Policy Committee (CPMO) however signalled a new orientation at its meeting on Wednesday, by deciding to keep the MIMO rate unchanged on the basis of signs of a slowdown in inflation.

In October, “annual inflation for the cities of Maputo, Beira and Nampula slowed down to 11.08%, after 12.01% in September”, the CPMO reports.

The creation of the ‘prime rate’ was agreed between the central bank and the AMB in 2017, as a way towards eliminating the proliferation of interest rates in the cost of money.

At the time of its launch, it was 27.75%, and has fallen 515 basis points since.

The aim is for all credit operations to be based on a single rate, “plus a margin (‘spread’), which is be added or subtracted from the ‘prime rate’ through risk analysis” of each contract, the scheme’s promoters explained at the time.

Source: Lusa