Mozambique: Here are two key steps for economic stability according to the IMF
File photo: Lusa
The Bank of Mozambique reiterated this Thursday (21-07) that the prices of products and services would continue to increase considerably in the coming months, mainly due to the high costs of oil and food in the international market passing through to the domestic economy.
The Monetary Policy Committee (CPMO) of the Bank of Mozambique has therefore decided to maintain the monetary policy (MIMO) interest rate at 15.25%.
The institution issued its first alert about the increase in the cost of living on 20 May of this year and, two weeks ago again warned in a briefing to journalists about the continuous increase in prices.
This Thursday, the institution reiterated the alert warning, justifying it on the grounds that, domestically, uncertainties prevail regarding the adjustment of the prices of administered goods, with emphasis on fuels and the magnitude of their impact on the prices of other goods and services. Externally, the Bank of Mozambique says that uncertainties remain regarding the extension of the geopolitical conflict between Russia and Ukraine.
“In June, annual inflation accelerated to 10.8%, against 9.3% in May, mainly reflecting the increase in the prices of administered goods, especially fuel and transport. Underlying inflation, which excludes the prices of administered goods and services and of fruits and vegetables, and which is influenced by monetary policy, accelerated slightly, essentially translating the pass-through of the increase in administered prices to those of other goods and services,” the central bank notes.
In a statement sent to ‘Carta’, the institution also mentions that the prospects of economic recovery in 2022 and 2023 remain, despite the slowdown in external demand. In the short and medium term, the economic recovery will be sustained, mainly, by the execution of energy projects in Inhambane and in the Rovuma basin, and by the beginning of the export of liquefied gas, in a context of resumption of the International Monetary Fund programme and inputs from other cooperation partners.
In the same document, the Bank of Mozambique warns that domestic public debt remains high. “Domestic public indebtedness, excluding loan and lease agreements and outstanding liabilities, stands at 248.2 billion Meticais, which represents an increase of 29.4 billion Meticais compared to December 2021,” the statement reads.
Recent macroeconomic prospects are consistent with maintaining the current level of the MIMO rate in the short term. However, in case of aggravation of risks and uncertainties associated with inflation projections, the Bank of Mozambique underlines in a statement that it will not hesitate to increase the MIMO rate in order to ensure single-digit inflation in the medium term.
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