MAPUTO, The Monetary Policy Committee of the Bank of Mozambique has announced that it is holding its benchmark interest rates steady, but is preparing to introduce an entirely new reference rate.

The Governor of the central bank, Rogerio Zandamela, told the media here Monday that the Standing Lending Facility, the interest rate paid by commercial banks to the central bank for money borrowed on the Inter-bank Money Market, will remain at 23.25 per cent, the level to which it was hiked in October.

The Standing Deposit Facility, the rate paid by the central bank to the commercial banks on money they deposit with it, remains at 16.25 per cent. Likewise, the Compulsory Reserves Coefficient, the amount of money that the commercial banks must deposit with the Bank of Mozambique, also remains unchanged at 15.5 per cent.

However, from April 15, the Bank will introduce a new interest rate, to be known as the monetary policy rate. The central bank’s interventions on the inter-bank money market to regulate liquidity will be based on this new rate.

With the introduction of the new rate, “it is intended to strengthen the mechanism for forming interest rates on the market as a whole, making it more transparent and in line with good international practices”, said Zandamela.

The new rate will not exactly replace the Standing Lending and Deposit Facilities. “These rates will continue. They will co-exist with a new model, and they will form a corridor within which the new monetary policy rate will fluctuate. The rate will not rise above or sink below this corridor,” the governor said.

The central bank, he added, will intervene daily in the inter-bank market to ensure that the new rate remains within these parameters.

From April 3, for the first time, the Bank of Mozambique will have an exchange rate of its own, rather than simply citing the exchange rates fixed by commercial banks. The central bank rate, Zandamela said, will be an average of all the exchange rates used by commercial banks in dealing with their clients.

One surprise move from the Monetary Policy Committee was to abolish the limit on the use of Mozambican credit and debit cards outside the country, which was imposed in December 2015 by Zandamela’s predecessor, Ernesto Gove, after huge amounts of money were leaving the country through the unrestrained use of credit and debit cards abroad.

On Monday, the Monetary Policy Committee revoked this measure. Zandamela claimed that the moments of crisis which had led to the measure were now over, with greater exchange rate stability since late 2016, and increased confidence by businesses in the Mozambican currency.

The metical was now recovering somewhat against the dollar. The figures given by Zandamela showed that between the end of November and the end of January the metical had appreciated against the dollar by 6.6 per cent.

But the same could not be said for the value of the metical against the South African Rand, the currency in which most imported food and drink is denominated. Over the same period the metical depreciated against the Rand by about two per cent. But in the first fortnight of February, the metical has slowly gained ground against both the dollar and the Rand, and the forecast is for relative exchange rate stability for the rest of the year.