Mozambique: Central bank warns of risk of inflation rising in the medium term

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Mozambique: Central bank warns of risk of inflation rising in the medium term

1:39 CAT | 11 Apr 2025

FILE - For illustration purposes only [File photo: O País]

The Bank of Mozambique admits there is a risk of inflation rising in the medium term, due to the worsening of “fiscal risk”, particularly in a context of difficulty in mobilizing resources for the State Budget.

“The risks and uncertainties associated with inflation projections have increased,” states the most recent Economic Situation and Inflation Outlook Report from the Bank of Mozambique.

“The impacts of the worsening of fiscal risk, in a context of increasing challenges in mobilizing financial resources for the State Budget, and the effects of climate shocks and post-election tension on the prices of goods and services, stand out as likely factors for increasing inflation in the medium term,”` the document points out.

Nevertheless, the Bank of Mozambique maintains its forecast of “single-digit inflation in the medium term, essentially reflecting the stability of the metical and the impact of the measures” taken by the Monetary Policy Committee, which has been progressively lowering the interest rate.

Prices in Mozambique rose 0.52% in February, with year-on-year inflation reaching 4.74%, according to data previously released by the National Statistics Institute (INE).

The INE’s Consumer Price Index (CPI) indicates that Mozambique “recorded a price increase of around 0.52%” compared to January (1.45%), in which, as in previous months, food and non-alcoholic beverages stood out, contributing 0.33 percentage points to the total monthly variation.

This is the sixth consecutive monthly increase, after the CPI recorded four months of deflation: 0.11% in August, 0.05% in July, 0.21% in June and 0.38% in May.

The INE also states that the data for the first two months of the year, when compared with 2024, indicate a year-on-year price increase of 4.74%, influenced mainly by the food and non-alcoholic beverages and restaurants, hotels, cafés and similar sectors, which increased by 11.89% and 6.20% in one year, respectively.

Accumulated inflation for 2024, according to previous data from the INE, stood at 4.15%, compared to 5.3% in 2023, but below the peak of almost 13% reached in July 2022.

Source: Lusa