The prime rate for credit operations in Mozambique rose the most since March 2021, from 20.6% to 22.5%, announced the Mozambican Banking Association (AMB).

The rate calculated monthly by AMB and Banco de Moçambique (BM) is based on a single index (calculated by the central bank), which rose to 17.2%, and a cost premium of 5.3% (defined by AMB), which remains unchanged.

This is the third increase this year: in May, the prime rate rose by 50 basis points and in June, it rose by 150.

You have to go back to March 2021 to find a steeper rise than today.

At the time, the depreciation of the metical and the risks to the economy associated with covid-19, cyclones and armed violence caused a jump of 230 basis points.

The increases in the prime rate have been associated with the central bank raising the monetary policy interest rate (MIMO rate, which influences the formula for calculating the prime rate) in order to control inflation.

Year-on-year inflation was 12.01% in September, a slight slowdown of 0.09 percentage points compared to 12.1% in August, so slight that it amounts to saying that prices have stagnated.

Food, non-alcoholic beverages, and transport have been the goods and services that have contributed the most to price increases in Mozambique.

The creation of the 'prime rate' was agreed in 2017 between the central bank and the AMB to eliminate the proliferation of reference rates in the cost of money.

At the time, it was launched with a value of 27.75% and has been 525 basis points lower ever since.

The aim is for all credit operations to be based on a single rate, "plus a margin (spread), which will be added to or subtracted from the prime rate through risk analysis" of each contract, according to the promoters.