Mozambique cuts benchmark lending rates

The Mozambican Central Bank has cut the benchmark lending rate by 50 basis points to 9 percent, a private bank said in a statement on Friday.
The announcement surprised many who expected the rate to remain the same, according to banking officials quoted in a statement.

“Initially we thought the central bank would at least hold for a while, taking into account the inflation in April. Although the move came as a surprise, it has been growing pressure from the country itself that banks are not providing and supporting an environment for private development,” said Egildo Massuanguanhe, a representative from the Treasury and International Department at Barclays Bank Mozambique.
Barclays Bank Mozambique usually makes amendments to its own lending rates on any central bank changes, but the immediate adjusting of the rates for other commercial banks in the country is not always immediate.

Mozambique’s neigbhour South Africa, on the other hand, has major banks immediately adjust rates after a central bank rate change. “There may be some delay in the system, but on the back of the central bank decision there was the need to still promote an enabling environment and also to support the economy,” added Massuanguanhe. Food prices had climbed after the central and southern regions of Mozambique were hit with severe floods in January and decreased output although gas reserve discoveries are likely to help fill the gap.

Mozambique has been attracting huge interest as 100 trillion cubic feet of gas was discovered by American gas and oil exploration company Andarko Petroleum Company and Italian oil and gas company Eni in 2010. Exploration for possible oil reserves in the country is also underway.
The country’s primary lending rate dropped in April to 15 percent after having been reduced by 9 basis points. As a result, the average commercial loan rate was then 16 percent although the loan rate is usually higher. Massuanguanhe explained that despite some risks, Mozambique’s economy will maintain bullish in view of its performance and remains strong on the back of international business interests so far. Mining output has grown almost 41 percent in 2012 while future growth is expected to be supported by the private sector and some public investment.

sourced at starafrica.com