Mozambique keeps benchmark lending rate unchanged: at 20.6% in July

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Mozambique keeps benchmark lending rate unchanged: at 20.6% in July

1:42 CAT | 30 Jun 2022

File photo: VOA

The benchmark lending rate (‘prime rate’) for credit operations in Mozambique will remain at 20.6% in July, after rising for two months, the Mozambican Association of Banks (AMB) announced yesterday.

The rate calculated monthly by the Mozambican Association of Banks (AMB) and the Bank of Mozambique is based on a single index (calculated by the central bank) set at 15.3% and a cost premium of 5.3% (set by AMB), both unchanged.

In May, the prime rate rose by 50 basis points and in June by a further 150 basis points to its current value. The increases were associated with the rise in the monetary policy interest rate (MIMO rate, which influences the formula for calculating the ‘prime rate’) instigated by the central bank in order to control inflation.

Under pressure from global prices, year-on-year inflation in Mozambique rose to 9.31% in May, its highest value in the last four years and seven months.

The creation of the prime rate was agreed between the central bank and the AMB in June 2017, with an initial value of 27.75%, to eliminate the proliferation of reference rates for the cost of money.

The aim is for all credit operations to be based on a single rate plus a margin, or ‘spread’, to be added to or subtracted from the prime rate based on risk analysis of each contract, the institutions explained at the time.

Source: Lusa