Mozambique Raises Rate to 23.25% as Prices Shrug Off Past Hikes

(Bloomberg) -- Mozambique’s central bank raised its key rate by 600 basis points to 23.25 percent, the fifth increase this year, as the cost of living rose at the fastest pace in five months and the currency sank to a record low.

Increases totaling 7.5 percentage points this year have failed to tame inflation, which has been driven by the metical’s depreciation against the dollar. Consumer prices increased 2.71 percent in September, the highest monthly reading since April. The year-on-year rise was 24.9 percent.

The Mozambican metical has weakened 39 percent against the dollar this year, making it the worst-performing currency on the continent. It lost 32 percent in 2015.

Policy makers also increased the interest rate on the standing deposit facility to 16.25 percent from 10.25 percent, Governor Rogerio Zandamela told reporters in Maputo.

It’s Zandamela’s first rate decision since the former International Monetary Fund employee was appointed at the end of August to replace Ernesto Gove, whose term ended after 10 years.

Mozambique’s economy struggling under mounting debt after the global commodity slump, coupled with a freeze on aid, put its finances under pressure. The government owned up in April to the existence of $1.4 billion of previously undisclosed borrowing, including loans taken out by state-owned companies.