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Panorama Internazionale

01 NOVEMBRE 2017

15:42 - Mozambico

MOZAMBIQUE MAY REACH SINGLE-DIGIT INFLATION IN DECEMBER – CENTRAL BANK

(ICE) - ROMA, 01 NOV - Bank of Mozambique forecasts indicate that inflation could fall to single digits by December of this year, although Governor Rogério Zandamela says inflationary pressure remains high. Speaking yesterday in Maputo at a press conference to announce decisions taken by the bank’s Monetary Policy Committee (CPMO), Zandamela said that in September annual inflation slowed to 10.76 percent.The central bank governor said that the stability of the metical against the US dollar and the South African rand continued to favour an easing of inflation.The Bank of Mozambique’s international reserves continued to strengthen, with gross reserves increased to US$ 2,514 million as of October 20, sufficient to cover 6.1 months of imports of goods and services (excluding large projects), in a context in which the central bank’s sales were US$365 million. Meanwhile, provisional data show that the trade deficit narrowed substantially in the third quarter of 2017, economic activity continued to slow, and the concentration of liquidity in the interbank money market increased. The level of domestic public indebtedness also continues to rise. Figures reported on October 25 show that domestic public debt increased to 100.5 billion meticais, up from 97.7 billion reported at the last CPMO session on 10 August.“This indebtedness shows, in part, the difficulties of the public sector in mobilising resources to finance expenditure in a context in which the resumption of direct external support to the Mozambican state budget is not expected in the short or medium term, which translates into the prevalence of high fiscal risk,” Zandamela said. Other risk factors noted by the governor are associated with extreme weather events, commodity price volatility and the political environment in neighbouring countries, especially in South Africa.According to the governor, the growing evidence of materialisation of some risks justify the continuation of a prudent stance in the conduct of the monetary policy.“As a matter of fact, the prolongation of the freezing of direct external support to the state budget will require additional fiscal measures and the acceleration of reforms and, taken as a whole, may favourably affect the behaviour of macroeconomic indicators.”Even in the face of such risks, the CPMO considers that there may be room for a moderate decline in interest rates and has decided to reduce the monetary policy interest rate rate by 50 basis points to 21 percent with immediate effect; reduce the interest rate on the marginal lending facility (FPC) to 22 percent; reduce the interest rate on the deposit facility (FPD) to 15.5 percent; and the reserve requirement ratio for liabilities in domestic and foreign currency by 100 basis points to 14 percent. (ICE Maputo)