“I think that the factors that have influenced the decision from the Central Bank are the fact that we have seen some inflationary pressures surging into the economy. If we look at the data that was released recently, 4.6 per cent was the year inflation, which was caused mainly by the increase in food and fuel prices,” Millennium BIM chief economist Omar Mithá told CNBC Africa on Monday.
The Monetary Policy Committee also decided to intervene in the interbank market to ensure that the monetary base doesn’t exceed 42 billion metical by the end of this month.
According to Mithá, the MPC’s reason for keeping the interest rate on hold is to keep the second round effects from increasing and adding further pressures to the economy.
Severe flooding in Mozambique earlier this year caused a downside revision of the growth in GDP and saw credit grow by 28 per cent in May year on year.
The country’s coal distribution has recently been disrupted by opposition party the Mozambican National Resistance (Renaom), which threatened to attack rail and road operations in the Sena railway line, a main exit port for coal.
“I think that there are some inflationary pressures and the central bank has realised also that there are second round effects. It appears to me that we have reached a point where monetary loosening is no longer a choice for Mozambique given the fact that this is now entailing higher pressure in terms of inflation and the pro-growth,” said Mithá.