Mozambique: Reference interest rate drops for the fifth time this year

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Mozambique: Reference interest rate drops for the fifth time this year

1:30 CAT | 04 Jun 2024

Image: Banco de Moçambique

The reference interest rate for credit transactions in Mozambique will fall to 22% in June, its fifth drop in six months, the Mozambican Bank Association (AMB) announced today.

The ‘prime rate’ had been falling since 2018, reaching a low of 15.5% in February, 2021 before rising to 23.50% in April last year, and to 24.10% in July, which it maintained in subsequent months.

In January 2024, the rate returned to April values, after six consecutive months at maximums of 24.10%, remaining unchanged in February due to AMB’s decision, at 23.50%, falling in March to 23.10%, in April to 22.70%, in May to 22.30% and now to 22%.

Increases in the ‘prime rate’ are associated with the increase in the monetary policy interest rate (MIMO rate) by the central bank, in order to control inflation.

The Monetary Policy Committee (CPMO) of the Bank of Mozambique decided on May 27th to once again lower the MIMO rate from 15.75% to 15%, justifying it with the prospect of inflation remaining in single digits in the medium term.

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, and launched with a value of 27.75%.

The objective was 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