The Bank of Mozambique (BdM) and the Mozambican Banking Association (AMB) have reduced the Prime Rate that will apply to credit institutions in March from 23.50% to 18.50, a drop of five percentage points.

The information is contained in a document released this Monday (03), by the two institutions and to which the MZNews had access to.

According to the note, the Prime Rate of the Mozambican financial system had been falling since 2018, to a low of 15.5%. However, in February 2021, the trend reversed and the rate began to rise until it reached 23.50% in April, and then 24.10% in July, which was maintained in all the following months.

The Prime Rate of the Mozambican financial system is the only reference rate for variable interest rate credit operations. It applies to credit operations contracted between credit institutions, financial companies and clients, plus a margin (spread) which is added or subtracted according to the risk analysis of each specific credit category or operation. Therefore, with this measure, credit institutions will be able to react by also revising upwards the interest rates they charge on transactions with the public.

According to a statement from the two institutions, the Single Index calculated monthly by the Bank of Mozambique is set at 12.30%: "The Single Index is the average rate measured by the volume of operations carried out on the interbank money market for a maturity of one working day (overnight), namely operations at the monetary policy interest rate (MIMO rate) between the BdM and the commercial banks."

Also according to the document, the agreement on the Single Index for the Mozambican banking system aims to promote greater transparency in the process of setting variable interest rates in the market and to improve the monetary policy transmission mechanism.

(Photo DR)