Mozambique becomes first in Africa to cut rates twice in 2024

Mozambique’s central bank became the first in Africa this year to reduce its benchmark lending rate at successive meetings, after consumer inflation slowed to an almost four-year low.

The Banco de Moçambique cut the gauge — known by the Portuguese acronym Mimo — to 15.75% from 16.5%, Governor Rogerio Zandamela told reporters Wednesday in the capital, Maputo. It’s the first time since the height of the coronavirus pandemic that it’s lowered rates at two consecutive meetings.

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Annual inflation softened to 4% in February, the lowest rate since 2020, in part due to currency stability. The metical has been little changed against the dollar since 2021.

The International Monetary Fund said last year the central bank’s management of the currency has resulted in a de facto fixed exchange rate, through tight regulation and moral suasion. The Washington-based lender also said in December there was room for rate cuts.

The move makes the liquefied natural gas producer an outlier among African central banks. Only two others have lowered rates this year, with the rest either raising or standing pat amid price-pressure concerns.

The nation started exporting LNG in 2022, and production ramped up last year. An Islamic State-linked insurgency has halted bigger LNG export projects in the northeastern Cabo Delgado province.

The economy grew by 5.4% in the last quarter of 2023, compared with a year earlier, Zandamela said. Excluding LNG, growth was 3.6% versus 3.3% in the September quarter, he said.

Zandamela again warned about rising domestic public debt, which has grown to 344 billion meticais ($5.4 billion), an increase of 31.7 billion meticais from the end of December.

© 2024 Bloomberg

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