Mozambique holds rate, tightens liquidity

The Bank of Mozambique left its main policy interest rate, the MIMO, unchanged at 9.25% at its Monetary Policy Committee (CPMO) meeting on May 25, 2026. The central bank framed the decision as a response to a complex risk environment, combining a policy rate pause with tighter liquidity measures and an upgraded inflation warning.

According to the CPMO, the decision to hold the benchmark rate reflected "the prevalence of high uncertainty" over the duration of the conflict in the Middle East, specifically Iran, and its possible impact on international and domestic fuel and food prices as well as on supply chains. The committee signalled that these external shocks are shaping the near term policy stance.

Alongside the rate hold, the CPMO decided to absorb excess liquidity in the banking system by raising the required reserve ratio on liabilities in national currency to 39%, from 29%. This measure aims to tighten domestic liquidity conditions without changing the headline policy rate.

The required reserve ratio on foreign currency liabilities was maintained at 29.5%, indicating a targeted adjustment focused on metical‑denominated funding. The central bank described the package as combining a rate pause with tighter liquidity to address evolving risks in the economy and financial system.

The central bank reported that annual consumer inflation accelerated to 4.41% in April 2026, compared with 3.37% in March 2026. In response, the CPMO revised its inflation outlook upward, noting that recent data point to increasing price pressures.

The committee warned that in the short and medium term inflation could accelerate further and potentially reach double digits, depending on how long the conflict in the Middle East persists and its impact on supply chains and on fuel and food prices. This risk assessment underpins the decision to tighten liquidity while keeping the policy rate unchanged.

Beyond external shocks, the Bank of Mozambique highlighted several domestic vulnerabilities. Public domestic debt, excluding certain loan and lease contracts and overdue liabilities, was reported at 493.1 billion meticais, an increase of 18.5 billion meticais compared with December 2025.

The authorities also cited risks stemming from flood‑related disruptions, fiscal arrears and weak economic activity. These factors contribute to the overall risk profile facing the economy and were referenced as part of the backdrop for the latest monetary policy decisions.

Taken together, the May 25 measures reflect an attempt to balance rising inflation risks and financial stability concerns with ongoing economic fragilities. The central bank signalled it will continue to monitor both external and domestic developments as it calibrates its policy mix.