Mozambique's Key Rate at Four-Year High as Inflation Surges

  • Policymakers increase rate to 12.75 percent from 10.75 percent
  • Consumer prices rose 12.2 percent in February from year before

Mozambique’s central bank raised its benchmark policy rate to the highest level in four years as inflation continues to accelerate.

Policy makers increased the rate to 12.75 percent, the highest since June 2012, from 10.75 percent, the Maputo-based central bank said in a statement on its website on Wednesday. It’s the second increase since February, when the bank lifted the rate by one percentage point.

Inflation accelerated to 12.2 percent in February compared with 2.2 percent six months earlier, according to the National Statistics Institute. The economy grew 5.6 percent in the fourth quarter of 2015, compared with 4.6 percent a year earlier, the statistics office said in February.

The International Monetary Fund last week canceled a mission to the coal-producing nation after it discovered around $1 billion of undisclosed debt and said it changes the fund’s assessment of Mozambique’s macroeconomic outlook. Yields on $727 million of notes due in January 2023 climbed 169 basis points since April 13 to 14.36 percent.

The country is at “high risk” of debt distress and may have to repay $119 million it borrowed as part of a $286 million emergency facility signed with the Washington-based lender last year, according to Anne Fruhauf, senior vice president at Teneo Intelligence.

The metical has lost 38 percent against the dollar since the start of last year. The currency traded 1.6 percent stronger at 52,65 per dollar at 8:15 a.m. in Maputo.

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