Mozambique: Prime lending rate to remain at 5-year high of 24.1% in September

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Mozambique: Prime lending rate to remain at 5-year high of 24.1% in September

11:22 CAT | 01 Sep 2023

File photo: DW

The prime rate for credit operations in Mozambique is to remain at 24.10% in September, for a third consecutive month, representing a five-year high, the Mozambican Banking Association (AMB) has announced.

The prime rate had been falling since 2018, to a low of 15.5% in February 2021, when the trend reversed. In April of this year the rate was already at 23.5%, and has been at 24.10% since July.

The increases in the prime rate have been linked to the Bank of Mozambique’s having increased the monetary policy interest rate (the MIMO rate, which influences the formula for calculating the prime rate) in order to control inflation.

At the end of July the central bank kept the MIMO rate at 17.25%, as well as leaving unchanged the level of mandatory reserves required of commercial banks.

The creation of the prime rate was agreed in 2017 between the central bank and AMB to eliminate the previous proliferation of reference rates for the cost of money. At the time, it was launched at 27.75%.

The aim is for all credit operations to be based on a single rate, plus a spread that is added to or subtracted from the prime rate by analysing the risk of each contract, officials explained.

Source: Lusa