The Monetary Policy Committee of the Bank of Mozambique has announced that it is holding its benchmark interest rates steady.

Thus, the Standing Lending Facility, the interest rate paid by the commercial banks to the central bank for money borrowed on the Interbank 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.

Bank of Mozambique Governor Rogerio Zandamela told the media here Wednesday that the sharp interest rate rises of October were having the desired effect of mopping up excess liquidity and halting the depreciation of the Mozambican currency, the metical.

On Tuesday, the US dollar was quoted at an average of 72.4 meticiais to the dollar in the commercial banks. This meant that, since Oct 7, the metical had gained 7.8 per cent against the greenback. The annual depreciation of the metical against the dollar is now 31 per cent.

As for the South African rand, it was quoted at 5.33 meticais to the rand on Tuesday, an appreciation of 7.4 per cent over the same period. The annual depreciation of the metical against the rand is now around 41 per cent.

The recovery against the rand is significant, since it should lead to a reduction in the prices of food and drink imported from South Africa.

Zandamela also said the drain on Mozambique’s net foreign reserves has been reversed. Since November the commercial banks have sold 174 million USD to the central bank. This was the main factor in pushing the reserves up to 1.754 billion dollars, enough to cover 3.5 months of imports of goods and non-factor services, excluding the imports of the foreign investment mega projects.

The reserves had stood at just short of two billion dollars at the end of 2015, but had fallen to 1.676 billion in October.