Mozambique cuts interest rates for first time since 2020

In a move to stimulate economic growth and combat inflation, Mozambique's Central Bank announced a 75 basis point cut in the key rate to 16.5% during its recent Monetary Policy Committee (MPC) meeting. This decision marks the first rate cut since 2020 and reflects cautious optimism in light of prevailing economic challenges. Speaking on CNBC Africa, Celio Hamide, Head of Sales for Global Markets at Standard Bank, provided valuable insights into Mozambique's economic landscape. Hamide highlighted the Central Bank's efforts to balance its monetary policies, noting that while the recent rate cut was a step towards easing financial conditions, the institution remained cautious in its approach. He emphasized the importance of maintaining a tight monetary policy to curb inflationary pressures, even as the country's inflation rate showed a slight decline from previous months. Despite the single-digit inflation levels, Hamide underscored concerns about potential external risks, such as the impact of El Nino on the region. Addressing the country's GDP forecast for the year, Hamide projected a growth rate of around 4.5%, influenced by factors like the resumption of LNG projects and election-related policies. He acknowledged the significant role of the energy sector in driving economic expansion, particularly through exports. The recent boost in LNG exports and a reduction in import expenses contributed to improving Mozambique's current account deficit, signaling a positive trend in the country's balance of payments. Looking ahead, Hamide emphasized the need for continued vigilance in managing external risks and sustaining economic stability amid evolving global conditions. He pointed out the potential impact of election-related expenditures on fiscal policy and highlighted the importance of maintaining stable foreign exchange reserves. As Mozambique navigates through a critical juncture in its economic trajectory, policymakers and financial institutions are expected to collaborate closely to support sustainable growth and mitigate external vulnerabilities. With a focus on enhancing transparency and accountability, stakeholders in Mozambique's economy are urged to prioritize structural reforms and strategic investments that promote long-term resilience and competitiveness. As the country's economic landscape continues to evolve, stakeholders are encouraged to adopt prudent financial practices and explore new avenues for diversification and innovation. By fostering a conducive business environment and promoting inclusive growth strategies, Mozambique can harness its potential and chart a path towards sustainable development and prosperity.