Standard Bank predicts a slight reduction in inflation, which has been on the rise in recent months, but says this may only happen by the end of the year, when it averages 11.7%. The peak, estimated at 12.21 Q2ETT, could be in August.

According to the bank's chief economist, Fáusio Mussá, this scenario is due to a series of shocks, internal and external, to which the national economy has been exposed, with emphasis on the impact of climate change on food prices and the war in Ukraine on fuel prices, with an effect on other prices in the economy.

To respond to these threats, he explains, the government has announced, for example, its intention to subsidize transportation, as well as a fuel import component to ensure a certain stability in prices, "especially since the most vulnerable strata of our society are the ones who suffer the most from the impact of rising fuel prices."

"In this scenario, our expectation is that the Bank of Mozambique will keep the monetary policy reference interest rate (MIMO) until the end of the year at the current level of 15.25%, but there is no guarantee that this will happen, especially if there is some surprise that translates into higher than expected inflation," he stressed.

Fáusio Mussá, who was speaking recently, in the virtual session of the Economic Briefing, showed concern about the fall in international reserves, which has resulted in the reduction of months of import coverage to about 4.7 months, which may have an impact on the evolution of the metical.

Meanwhile, he says that in view of the increased foreign aid (from the World Bank, the International Monetary Fund, and other supporting partners), the government can be expected to restore the level of reserves to a ratio of more than four months of imports in the coming months.

"That may help reduce some pressures that are in the foreign exchange market from a liquidity standpoint," he indicated.

In another development, Standard Bank's chief economist considered that the improved security conditions in the areas near natural gas exploration projects in the Rovuma Basin, in Cabo Delgado, may dictate the resumption of construction work on the TotalEnergies complex, in the Afungi peninsula, in the district of Palma, in the first half of next year.

Work on Area 1, with an estimated investment of more than 20 billion US dollars, the largest underway on the African continent, was suspended in April 2021 after terrorists attacked the town of Palma.

The suspension of the works on this project, according to Fáusio Mussá, will result in a delay in the beginning of the exploration of this resource, which, in turn, will be reflected in its contribution to the national economy in terms of exports and diversification of the country's revenues.

"From an export standpoint, our expectation is that the Area 1 project will start exporting from 2026, which means that between the end of this year and the first half of 2023 Total Energies will resume construction," he stressed.

The economist also referred to the Exxon Mobil project, whose Final Investment Decision (FID) has not yet been made, which, in his opinion, is linked to the suspension of the works by Total Energies.

"In principle, the Final Investment Decision is likely to be made within a maximum period of 12 months after the resumption of the Area 1 project, whose consortium is led by the French multinational Total Energies," he concluded.

Regularly held by Standard Bank, the Economic Briefing is an event that aims to guide its clients, in particular, and the market, in general, in decision making, by sharing the main trends of national and international economy.