BANK OF MOZAMBIQUE CUTS KEY INTEREST RATE

The Bank of Mozambique has reduced its key interest rate by 50 base points – the 11th time in the past two and a half years that the bank has cut this rate.At its monthly meeting, held on Wednesday, the Bank’s Monetary Policy Committee decided to reduce the Standing Lending Facility (the interest rate paid by the commercial banks to the central bank for money borrowed on the Interbank Money Market) from 8.75 to 8.25 per cent. But the Standing Deposit Facility (the rate paid by the central bank to the commercial banks on money they deposit with it) remains unchanged, at 1.5 per cent, and the Compulsory Reserves Coefficient - the amount of money that the commercial banks must deposit with the Bank of Mozambique – is also unchanged at eight per cent.The Committee also decided that the central bank will intervene in the inter-bank markets in order to ensure that the money supply does not exceed 44.729 billion meticais (about 1.5 billion US dollars) by the end of October. The money supply at the end of September was slightly more than 43.441 billion meticais – below the target figure set by the monetary policy committee of 43.817 billion meticais. There was an increase in notes and coins in circulation of 332.8 million meticais, while bank reserves shrank by 76.3 million meticais. The statement from the Committee noted that, according to the consumer price index for the three major cities (Maputo, Beira and Nampula), inflation rose by 0.24 per cent in September, following four successive months of price falls (deflation). Prices in Nampula rose by 0/92 per cent, and in Beira by 0.03 per cent, but in Maputo deflation continued with a price fall of 0.15 per cent.Inflation since January now stands at two per cent, while inflation over the past year (October 2012 to September 2013) is 4.52 per cent. 

The Bank attributes low inflation to increased supplies of vegetables, fruits and pulses in the cool season, to a reduction in international commodity prices, and to the decline in the value of the rand, which makes Mozambique’s imports from South Africa cheaper. The value of the metical against the US dollar was virtually unchanged over the most. On the last day of September, the metical was quoted at 29.86 to the dollar on the Inter-Bank Exchange Market. On the last day of August, there had been 29.85 meticais to the dollar.Against the South African currency, the metical was quoted at 2.98 to the rand. This was a slight depreciation of the metical by 2.4 per cent. However, since January the metical has gained in value by 14.1 per cent against the rand. In September, the statement said, the country’s net foreign reserves grew slightly (by 5.33 million dollars), bringing Mozambique’s total foreign reserves to 2.878 billion dollars, enough to cover imports of goods and services for 6.5 months. This figure was 256.5 million dollars higher than the target for the period.