Mozambique Central Bank Raises Rate to Highest Since 2012

December 16, 2015, 2:11pm

Maputo, photo: Wikipedia Commons

By Andres R Martinez and Giulia Camillo, Bloomberg  

Mozambique’s central bank raised its benchmark policy rate to the highest in three years to help curb inflation.

Policy makers increased the rate by 1.5 percentage points to 9.75 percent, the Maputo-based institution said in an e-mailed statement on Monday.

“The monetary policy committee thought it was important to continue with the steps that, along with other economic policies that have been outlined, will help consolidate gains in foreign exchange and to help stop a possible quickening of inflation in 2016,” Governor Ernesto Gove said. “These are essential to maintain macroeconomic and financial stability.”

Inflation in the southern African nation surged to 6.3 percent in November from as low as 1.3 percent in May and the currency has plunged 36 percent against the dollar, the worst after Zambia’s kwacha in Africa this year. Mozambique is the site of one of the world’s largest discoveries of natural gas in past decade and holds large deposits of iron ore.

The policy tightening comes before the U.S. Federal Reserve will decide at a meeting on Tuesday and Wednesday whether to raise interest rates for the first time in almost a decade. Emerging markets are more vulnerable to outflows if higher U.S. rates lure investment.

To help the economy withstand increasing pressure, Mozambique’s government has turned to the International Monetary Fund for a loan of as much as $286 million.

The metical slipped 0.5 percent to 51.02 per dollar at 8:02 a.m. in the capital, Maputo.