Mozambique holds rates, to boost monetary base

    Mozambique's central bank maintained its benchmark standing facility rate at 7.50 percent but will intervene in money markets in June to boost the monetary base to 59.204 billion meticais from a preliminary 55.582 billion in May, which was below the bank's forecast of 56.842 billion.
    The Bank of Mozambique (CPMO), which cut its rate by 75 basis points last year, noted the risks in the international economic and financial environment with a tendency toward deflation in most countries coupled with a persistent fall in the commodity prices and the stronger U.S. dollar, which has an impact on the country's external balance.
    Mozambique's metical currency has been depreciating in all market segments since August last year against the rising U.S. dollar, with the exchange rate used by commercial banks in their transactions with clients on the last day of May at 37.23 to the dollar, a monthly depreciation of 3.02 percent and an annual drop of 16.93 percent, the bank said.
    Mozambique's INE indicator of economic activity in April reflected pessimism among entrepreneurs with regard to current employment, job prospects and prices while there was optimism about demand, the central bank said.
    Mozambique's inflation rate eased to 1.29 percent in May from 1.98 percent in April, with the main impact coming from changes in the cost of food and non-alcoholic beverages.
    Last month the International Monetary Fund forecast that Mozambique's Gross Domestic Product could grow by 7 percent this year, below 2014's 7.4 percent but up from its April forecast of 6.5 percent.
    In the fourth quarter of 2014 GDP rose by an annual 7 percent from 7.6 percent in the third quarter.
    In the medium term, IMF described Mozambique as "one of the most dynamic economies in the continent, with rates of growth that could average 8 percent over the 2016-19 period."
    Plans to develop the country's oil and gas sector with investments of up to $100 billion represent  one of the largest investments ever seen in Africa and could transform the country into the third largest liquified natural gas (LNG) exporter in the world, the IMF said.
    Inflation this year if forecast to accelerate to 5.5 percent, in line with the government's medium-term objective of 5-6 percent, the IMF added.
 
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