- Mozambique trims benchmark rate to 9.75% amid downturn
- LNG restart seen as key to future growth
MAPUTO, MOZAMBIQUE – Mozambique’s central bank has lowered its benchmark interest rate to 9.75% from 10.25%, its 11th consecutive cut since January 2024, as the economy struggles with recession.
The Bank of Mozambique said the move reflects subdued inflation and weak economic conditions.
“This decision stems from prospects of inflation remaining in single digits over the medium term, partially reflecting the stability of the exchange rate and favourable international commodity prices, despite the prevalence of high domestic risks and uncertainties associated with the projections,” the bank said after its Monetary Policy Committee meeting.
Inflation pressures and economic slump
Annual inflation quickened to 4.8% in August from 4% in July, the highest since November 2023. Core inflation also rose, signalling pressures beyond food and fuel. Still, consumer price growth remains in the single-digit zone, underpinned by a stable metical and easing global commodity prices.
Mozambique’s economy, however, is under strain. GDP contracted by 5.73% in the last quarter of 2024, 3.9% in the first quarter of 2025 and 0.9% in the second, according to the National Institute of Statistics. Excluding liquefied natural gas (LNG), the second-quarter contraction widened to 1.7%, reflecting the country’s heavy dependence on the gas sector.
Public finances remain fragile. Domestic public debt, excluding loans, leases and arrears, reached 454.4 billion meticais by August – a rise of 38.8 billion since December 2024. The central bank warned that rising obligations are “undermining the normal functioning of the government securities market.”
The IMF has projected that Mozambique could gradually recover as LNG exports resume from insurgency-affected fields in the northeast.
“In the medium term, a gradual recovery in economic activity, excluding LNG production, is expected, partially supported by the prospects for the implementation of projects in strategic areas,” the bank said.
LNG revival ahead
On Monday, TotalEnergies CEO Patrick Pouyanné told investors in New York the company is preparing to restart its $20 billion LNG project. “Everything is ready, in fact, we are remobilizing on the ground,” Pouyanné said, adding that talks with the Mozambican government on final development plans are ongoing.
Although the restart may not deliver immediate relief, analysts say LNG exports will be vital to Mozambique’s medium- and long-term growth prospects.
