Mozambique’s central bank has paused interest rate cuts, keeping its benchmark rate at 9.25%.
Governor Rogerio Zandamela announced the decision in Maputo, explaining that rising debt and global uncertainty influenced the move.
Mozambique Holds Rate Steady
Importantly, this marks the first meeting since November 2023 where the bank held rates steady instead of reducing them.
Previously, the bank had steadily cut rates from 17.25% to stimulate growth after prolonged economic shocks.
Economic Pressures Mount
Meanwhile, the economy continues to face post-election unrest, severe flooding, and the closure of a major aluminium plant.
The aluminium plant had generated roughly one-fifth of Mozambique’s total export earnings before it shut down.
Moreover, rising fuel and fertiliser costs, which Mozambique imports entirely, are pushing domestic prices higher.
At the same time, global tensions in the Middle East could increase energy costs, straining Mozambique’s foreign reserves.
Governor Zandamela said that keeping rates steady reflects a cautious approach to preserving macroeconomic stability.
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Although annual inflation has remained below 5% since late 2023, early signs of rising prices worry policymakers.
In addition, the IMF recommended allowing more exchange rate flexibility to manage potential currency pressures.
Regional Monetary Trends
Across Africa, central banks are actively pursuing different strategies according to each country’s economic priorities.
For example, Uganda maintained its rate at 9.75%, sustaining an accommodative stance amid stable inflation.
Similarly, Zambia reduced rates to 13.5% from 14.25% as inflationary pressures eased.
Meanwhile, Nigeria lowered its Monetary Policy Rate to 26.5% from 27% in response to falling inflation.
In South Africa, inflation dropped to 3% from 3.5%, aligning closely with central bank targets.
Consequently, Mozambique’s cautious approach highlights the challenge of balancing growth, inflation, and global uncertainty effectively.
Overall, the decision shows how policymakers actively navigate domestic and international pressures while protecting economic stability.
