Mozambique: Prime rate rises to 20.6%

According to the Mozambican Association of Banks, the country's reference interest rate ('prime rate') for loan operations has risen the most since March 2021, climbing from 20.6% to 22.5%., 

The Bank of Mozambique rate calculated monthly by the AMB and the  (BM) is based on a single index (calculated by the central bank), which rose to 17.2%, and a cost premium of 5.3%, (set by the AMB ), which remains the same.

This is the third rise in 2022: in May the 'prime rate' had risen 50 basis points and in June, it rose 150.

To find a rise that is steeper than it is right now, go back to March 2021..

The depreciation of the metical at the time, as well as the dangers to the economy related with covid-19, cyclones, and armed unrest, necessitated a 230 basis point increase.

Increases in the 'prime rate' have been associated with the rise in the monetary policy interest rate (MIMO rate, which influences the formula for calculating the 'prime rate') by the central bank, in order to control inflation.

Year-on-year inflation was 12.01% in September, a slight slowdown of 0.09 percentage points from 12.1% in August, so slight that it is more equivalent to saying that prices have stagnated.

Food, non-alcoholic beverages, and transportation have been the most expensive commodities and services in Mozambique.

The central bank and the AMB decided in 2017 to establish the 'prime rate' in order to eliminate the proliferation of reference rates in the cost of money.

It was introduced at 27.75% at the time and has dropped 525 basis points since then.

According to the promoters, the goal is for all credit operations to be based on a single rate "plus a spread that will be added or deducted from the 'prime rate' through risk analysis."