Fitch Solutions predicts that the Bank of Mozambique (BM) will maintain the reference interest rate at 17.25% over the next year, sustained by economic growth of 6.5% and a 3.1% appreciation of the metical.

According to the most recent analysis of Mozambique's economic and monetary policy, this consultancy owned by the same owners of the financial rating agency Fitch Ratings estimates that the WB will maintain the reference interest rate, known as MIMO.

"We anticipate that the slowdown in price growth will limit the central bank's impetus to raise the rate, and that strong economic growth will discourage a rate cut," the analysts write in the commentary sent to investors, to which Lusa has had access.

In the report, Fitch Solutions also writes that the metical should continue to trade in the same band of 63 to 64 meticais per dollar in the coming weeks, ending at 63.70 meticais per dollar at the end of the year.

"We anticipate that the monetary policy committee will maintain the rate at 17.25% at the November 30 meeting, after raising the rate by 400 basis points this year to 17.25%," the analysts write, noting that this is the highest since March 2018.

Fitch Solutions' forecast is based on inflation slowing down for the second time in a row this year, to 11.8%, after having already reached 12.1% in August, and should end the year at 10.2%.

"In 2023, we see the Bank of Mozambique keeping the interest rate at 17.25% due to the slowdown in inflation and the acceleration in the growth of the Gross Domestic Product," the analysts say.

The metical, the analysts write, is expected to appreciate by 3.1% in 2023, to an average of 61.85 meticais per dollar, "based on improving macroeconomic fundamentals and rising revenues from gas exports".

As for economic growth, Fitch Solutions expects Mozambique to expand by 5.3% this year and 6.5% next year, above the five-year average prior to the pandemic, when growth was 4%.

"This is due to the low base effect and the increase in investment and production in the liquefied natural gas sector in the north of the country," the report concludes.(Lusa)