Mozambique keeps policy rate unchanged

The Monetary Policy Committee of the Banco de Moçambique has decided to keep the MIMO policy rate unchanged at 17.25 per cent. This decision comes in the midst of high risks and uncertainties associated with inflation forecasts, despite the potential for single-digit inflation in the medium term. Nasreen Van Der Westhuizen, Client Lead, South & Central Africa Regions at Global Markets, Standard Bank Group, sheds light on the implications of this decision and provides insights into the macroeconomic landscape of the Southern and Central African region. One of the key takeaways from the monetary policy decision in Mozambique is the unchanged interest rate, which was expected by the market. However, the increase in reserve ratios by 11 per cent, raising local currency reserves to 29 per cent and foreign currency reserves to 39.5 per cent, is seen as a hawkish stance aimed at curbing demand-based inflation. Additionally, the reduction in support for fuel imports from 100 per cent to 60 per cent in April, with a further reduction to zero per cent effective next week, is expected to exert pressure on foreign exchange demand in the future. Despite these changes, the impact on the METICAL has been relatively stable. Another significant factor influencing the macroeconomic landscape in Mozambique is the LNG and energy sector. The recent deal with Total Energies involving a $4.5 billion investment in a hydrogen project holds promise for addressing electricity shortages in the region. The market views this as a positive development that could potentially enhance stability in the energy sector across various countries. In Namibia, the green hydrogen deal with Hyphen signifies a step towards greater energy autonomy for the country. By creating local employment opportunities and focusing on local procurement, Namibia aims to become a hub for green hydrogen production. While the immediate impact may be limited, this initiative sets the stage for future advancements in renewable energy. Shifting focus to Zimbabwe, the government has initiated policy measures to combat currency depreciation and rising costs of goods. Changes in the auction system, reduced import taxes on basic goods, and the Treasury's takeover of external debt highlight efforts to stabilize the economy. The introduction of a tax on foreign exchange and dollar withdrawals aims to reduce the demand for US dollars and explore alternative forms of currency to support economic stability. Conversations surrounding South Africa's challenges, such as power outages and a depreciating RAND, have spilled over to neighboring countries like Botswana. The structural issues in South Africa impact Botswana through currency depreciation and cheaper imports. Despite concerns, Botswana remains optimistic about the potential sale of copper mining assets like comercal, which is viewed positively in the markets. In conclusion, while uncertainties persist in the macroeconomic environment of the Southern and Central African region, strategic policy decisions and investment initiatives signal a proactive approach towards addressing challenges and fostering economic growth. The coordination of efforts across countries in the region reflects a collaborative spirit aimed at achieving sustainable development and stability.