Mozambique: Prime lending rate remains unchanged for second straight month

Login

Register

http://www.clubofmozambique.com/

Mozambique: Prime lending rate remains unchanged for second straight month

3:55 CAT | 30 Aug 2024

FILE - For illustration purposes only. [File photo: Banco de Moçambique]

Mozambique’s prime rate, for loans and other credit operations, will remain at 21.2% in September, for the second straight month, the Mozambican Banking Association (AMB) announced this Friday.

This rate had been falling since 2018, reaching a low of 15.5% in February 2021, when the trend reversed and the rate began to rise until reaching 24.1% in July last year.

The prime rate returned to the values of April 2023 (23.50%) in January 2024, after six consecutive months at highs of 24.1%. It then fell in March to 23.10%, in April to 22.70%, in May to 22.30%, in June to 22% and in July to 21.2%.

The increases in the prime rate are associated with the increase in the monetary policy interest rate (MIMO rate, which influences the formula for calculating the prime rate) by the central bank, in order to control inflation.

On July 31st, the central bank’s Monetary Policy Committee (CPMO) decided to lower the main MIMO interest rate from 15% to 14.25%, justifying this with the prospect of inflation remaining in single digits in the medium term.

“This decision is supported by the continued consolidation of the single-digit inflation outlook in the medium term, in a context in which the uncertainties associated with the projections remain favourable,” said the governor of the Bank of Mozambique, Rogério Zandamela, during the presentation of the measures taken by the CPMO.

The creation of the prime rate was agreed in 2017 between the central bank and the AMB to eliminate the proliferation of reference rates in the cost of money.

At the time, the prime rate was launched with a value of 27.75%.

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

Source: Lusa