The Bank of Mozambique (BdM) and the Mozambican Banking Association (AMB) have set the Prime Rate that will apply to credit institutions during July at 21.20%, lowering it further for the fifth consecutive month.

For the current month, the two institutions have set the Prime Rate at 22%, compared to 22.70% in April.

According to a note released today, Friday (28), and to which the MZNews had access to, the Prime Rate of the Mozambican financial system is the only one that serves as a reference 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.

According to a statement from the two institutions, the Single Index calculated monthly by the Bank of Mozambique should be 15%: "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".

The agreement on the Single Index for the Mozambican banking system, according to BdM and AMB, aims to promote greater transparency in the process of setting variable interest rates in the market and to improve the monetary policy transmission mechanism. The creation of the Prime Rate was agreed in 2017 between the central bank and AMB to eliminate the proliferation of reference rates on the cost of money.

In addition, the BdM states that the Cost Premium, the margin that represents the risk elements of banking activity not reflected in interbank market operations, which is added to the Single Index to constitute the Prime Rate of the Mozambican Financial System, will remain unchanged at 6.20%.