Mozambique: Prime rate rises to 20.6%

File photo: VOA Portugues

The reference interest rate (‘prime rate’) for credit operations in Mozambique rises today by 150 basis points to 20.6%, the rate to be in force during the month of June, the Mozambican Association of Banks (AMB) has announced.

The rate calculated monthly by the AMB and the Bank of Mozambique, the county’s central bank, is based on a single index (calculated by the central bank ) which now rose from 13.8% to 15.3%, and on a premium cost, defined by AMB, which remained unchanged at 5.3%.

This is the second consecutive prime rate hike since the Bank of Mozambique decided at the end of March to increase the monetary policy interest rate (MIMO) – which influences the ‘prime rate’ calculation formula – with the aim of controlling inflation.

Year-on-year inflation in Mozambique rose to 7.9% in May, the highest value in the last four-and-a-half years, but the central bank expects it to remain at “single-digit [below 10%] levels in the medium term”. The ‘prime rate’ in October, 2021, was 18.6%, rising to 19.1% in May and to 20.6% in June.

The creation of the ‘prime rate’ was agreed five years ago between the central bank and the AMB to eliminate the proliferation of different rates in the cost of money. It launched at a value of 27.75%, and has dropped 715 basis points since then. The objective is for all credit operations to be based on a single rate, “plus a spread, which will be added or subtracted from the ‘prime rate’ through risk analysis” of each contract, the promoters explained at the time.

Source: Lusa

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