Friday, October 16, 2015


The Bank of Mozambique has announced an increase in its key interest rates, taking effect immediately.A statement issued after the monthly meeting of the bank’s Monetary Policy Committee, held on Wednesday, said that the Standing Lending Facility (the interest rate paid by the commercial banks to the central bank for money borrowed on the Interbank Money Market) will rise by 25 base points from 7.5 to 7.75 per cent.This rate had been held at 7.5 per cent since November 2014, and for the previous year it had been held at 8.25 per cent.
The statement announced also that the Standing Deposit Facility (the rate paid by the central bank to the commercial banks on money they deposit with it) rises by 50 base points from 1.5 to two per cent, while the Compulsory Reserves Coefficient - the amount of money that the commercial banks must deposit with the Bank of Mozambique – rises from eight to nine per cent.The statement attributes theses changes to “the prevailing risks” and the projections for inflation in 2016 “which point to a higher level than the average for the last three years”.

But certainly the decline in value of the national currency, the metical, weighed heavily in the central bank’s considerations. In September, the Bank had pledged to increase its sales of foreign currency to shore up the metical. This intervention may have helped stabilize the currency for a few weeks. On 30 September, the Us dollars was quoted at 40.04 meticais on the Inter-bank Exchange Market. This was a very slight appreciation, of just 0.2 per cent over the month.But in those segments of the market where ordinary citizens buy and sell currency – the commercial banks and the foreign exchange bureaux – the metical continued its slide. The average quotation in the commercial banks on 30 September was 44.33 meticais to the dollar, and in the foreign exchange bureaux it was 44.79 to the dollar. This was a monthly devaluation of the metical of 6.14 per cent in the banks, and of 5.46 per cent in the exchange bureaux. The metical fared much better against the South African rand, the currency of the country’s main trading partner. The quotation on the inter-bank exchange market was 2.89 meticais to the rand, an appreciation of 3.99 per cent over the month. Taking the year as a whole (1 October 2014 to 30 September 2015), the metical depreciated by 30 per cent against the dollar, but by only 6.25 per cent against the rand.The Bank of Mozambique’s attempt to boost the metical was partly responsible for the erosion of the country’s net international reserves in September. The reserves declined by 246.4 million dollars over the month, falling to 2.308 billion dollars, which was 342.1 million dollars below target.The major contributions to this erosion were 125.5 million dollars in payment of Mozambique’s public foreign debt, and 139.9 million dollars sold on the Inter-Bank Exchange Market. These were the sums used by the Central Bank to support the metical.On 30 September, the reserves were sufficient to pay for 3.42 months of imports of goods and non-factor services, when the operations of the foreign investment mega-projects are excluded. At the end of August, the reserves had been enough to pay for 3.76 months of imports.The Monetary Policy Committee also decided that the central bank will intervene in the inter-bank markets to ensure that the monetary base does not exceed 62.925 billion meticais by the end of October. In September, the monetary base increased by 1.270 billion meticais, to reach 61.547 billion meticais. This was a success, in that it was 545 million meticais lower than the ceiling set for the period.Provisional data on the balance of payments, referring to the second quarter of 2015, show a deterioration in the current account of 93.1 million dollars (3.9 per cent), when compared with the same period in 2014.

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