Good afternoon. Yesterday’s announcement of an interest rate cut by the Bank of Mozambique (see below) was more significant for what did not change than for what did. The bank cut its reference interest rate, known as Mimo, from 14.25% to 13.5%, and reduced its lending and deposit rates by the same amount. What it did not do, however, was reduce its reserve requirements for domestic or foreign currency.
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The rate cuts will not have surprised anybody; the International Monetary Fund (IMF) has been calling for them, the bank’s governor Rogério Zandamela has been promising them, and this is the fifth rate cut the bank has announced this year. But reserve requirements remain exceptionally high, at 39% for domestic currency and 39.5% for foreign currency, compared to 10.5% and 11.5% last year. Those requirements have not changed for over a year now, despite inflation falling; the IMF’s last forecast in July expected it to be at 3-4% this year.
