Mozambique Holds Key Policy Rate at 9.25%

The Bank of Mozambique left its MIMO policy rate unchanged at 9.25% at its July 2026 meeting, maintaining borrowing costs at their lowest level since December 2015 for a third consecutive meeting. Headline inflation accelerated to 7.5% in June from 7.2% in May and is expected to remain elevated in the near term, reflecting higher global energy prices, before easing over the medium term. Meanwhile, economic activity is projected to moderate, with growth excluding natural gas estimated at 1.1% in the first quarter, down from 4.8% in the previous quarter, while output including natural gas is expected to contract 0.1%. Policymakers highlighted heightened uncertainty surrounding the duration of the Middle East conflict and its potential impact on supply chains, as well as international and domestic fuel and food prices. Future policy decisions will depend on evolving risks and uncertainties surrounding the inflation outlook.

The Bank of Mozambique left its key MIMO interest rate at 9.25% in May 2026, the lowest level since December 2015, marking the second consecutive hold. The decision reflects the prevalence of high uncertainty over the duration of the Middle East conflict and its potential impact on supply chains, as well as international and domestic fuel and food prices. The annual inflation rate in Mozambique accelerated for the third consecutive month, reaching a six-month high of 4.41% in April 2026. Inflation is expected to accelerate in the short to medium term, potentially reaching double digits, depending on how the conflict evolves. Meanwhile, the Committee decided to increase the reserve requirement ratio for liabilities in domestic currency from 29% to 39%, aiming to absorb excess liquidity in the banking system that could generate additional inflationary pressure. The reserve requirement ratio for foreign currency liabilities was set at 29.5%.

The Bank of Mozambique maintained its main policy rate at 9.25% in March 2026, keeping it at its lowest level since December 2015 and pausing the easing cycle that began in 2024. The decision reflects rising external concerns regarding inflation expectations, driven by the conflict in the Middle East, as well as domestic uncertainty surrounding production and supply chains following flood-related damage earlier in the year. Headline inflation rose to 3.2% in February, after reaching a little over one-year low of 3.04% in January. The economy expanded by 4.7% in the final quarter of 2025, following a contraction of 0.9%, reflecting improved performance. Economic growth expectations have moderated with activity projected to increase slowly and gradually. Meanwhile, domestic public debt continues to deteriorate, hindering financial markets, as delays in the payment of domestic public debt by the State persist, impacting the demand for government bonds and the rigidity of interbank rates.