Continuing the five-year cycle of highs, the prime interest rate, which guides lending operations in Mozambique, will remain at 23.5% in June, as announced by the Mozambican Association of Banks (AMB).
One has to go back to May 2018 to find an equivalent figure. The prime rate then declined, reaching a low of 15.5% in February 2021. In the current climate, however, the trend has reversed, with the rate climbing step by step until settling at 23.5% since April.
The rise in the prime rate has been correlated with the growth in the monetary policy interest rate (the MIMO rate), which plays a leading role in the prime rate equation, set by the central bank with the aim of getting inflation under control.
Along the same lines, Mozambique's central bank chose this week to keep the MIMO rate at 17.25%, while at the same time increasing the reserve requirements imposed on commercial banks.
The prime rate was devised in 2017 as the result of an agreement between the central bank and the AMB, with the aim of ending the unchecked proliferation of reference rates in the cost of money, and was set at an initial value of 27.75%.
The underlying intention is that all credit transactions be based on a single rate, with a margin (spread) added to or subtracted from the prime rate according to the risk analysis of each contract, explain those responsible for the initiative.
