MAPUTO-� The Bank of Mozambique has lowered its benchmark interest rate by 75 basis points, following a meeting of the central bank’s Monetary Policy Committee (CPMO).

It announced here Monday that the Interbank Money Market Rate (MIMO) was lowered from 16.5 to15.75 per cent, with immediate effect. The central bank’s interventions on the inter-bank money market to regulate liquidity are based on this rate.

The Standing Lending Facility, the interest rate paid by the commercial banks to the central bank for money borrowed on the Inter-bank Money Market, remains unchanged at 18 per cent, while the Standing Deposit Facility, the rate paid by the central bank to the commercial banks on money they deposit with it),is cut by 50 basis points from 12.5 to 12 per cent.

The Compulsory Reserves Co-efficient, the amount of money that the commercial banks must deposit with the Bank of Mozambique,�also remains unchanged at 14 per cent for local currency, and at 22 per cent for foreign currency.

The Governor of the Bank of Mozambique, Rogerio Zandamela, said the economic conditions continued to favour the forecast of low and stable inflation, in the medium term, but there remained various risks which required prudence in the conduct of monetary policy.

He pointed to the risk associated with the sustainability of the public debt, and “uncertainties about the development of administered prices, a reference mainly to fuel prices.

There were also international risks associated with the commercial tension between the main economies as well as the volatility of the US dollar and of key commodity prices. Nonetheless, the central bank believed a further relaxation in its benchmark interest rate was in order.

This year the Bank of Mozambique has repeatedly cut the MIMO rate but this has not elicited the response it had wanted from the commercial banks, whose interest rates remain extortionately high. The commercial banks are reacting timidly to the fall in the MIMO rate, Zandamela delicately put it.

The average retail interest rate for loans of a year fell by only 3.2 percentage points between December and April, when they were 28.69 per cent. The prime rate in the banking system has fallen from 27.25 per cent at the end of 2017 to 22.5 per cent now.