Mozambique’s central bank on Friday slashed its benchmark interest rate by 150 base points to 11.25 percent from 12.75 percent as medium term prospects for the country’s inflation will remain low, APA can report.
“The Mozambican inflation rate will remain low in a context of greater decline in aggregate demand because of the impact of the Covid-19 pandemic on the domestic and international economy”, read a statement from the bank’s Committee on Monetary policy (CPMO).
According to the CPMO, the current projection for inflation is much lower than that made in February, the last time that the central bank considered lowering interest rates, but ended up leaving them unchanged.
The annual inflation rate in March was 3.09 percent, compared with 3.55 percent in February.
It added that the prospects for economic growth in 2020 have deteriorated.
The central bank warns that the economic consequences of Covid-19 are likely to be severe “in a scenario in which the Mozambican economy is still in a weakened position as a result of cyclones Idai and Kenneth which hit the country early last year, and of the military instability in the north and central regions of the country”.
Meanwhile, the Ministry of Health has announced that the number of confirmed coronavirus cases in Mozambique has risen to 34, three more from the 31 reported on Thursday.
Hopes for avoiding complete disaster rest on the agricultural sector, but the CPMO warns that good harvests “may not be enough to cushion the negative effects on the other sectors of the economy”.
CPMO added that the recent $15 million debt service relief granted by the International Monetary Fund (IMF) “will be directed to the fight against Covid-19”, but the heavy needs of the economy may imply greater pressure on public expenditure.”
So far, Africa accounts for just a fraction of total cases of the disease which has infected more than one million people worldwide, according to a World Health Organisation tally.
But African economies are already facing an impending global economic downturn, plummeting oil and commodity prices and an imploding tourism sector.
CM/as/APA