The spokesperson for the Bank's Board of Directors, Waldemar de Sousa, told reporters on Monday that preliminary indications are that by the end of May inflation had reached four per cent.
The final rate of inflation in 2006 was 9.37 per cent, and the government's target is to cut inflation to six per cent this year.
The Bank is optimistic that this can be achieved. Thanks to the harvest, food prices tend to fall in the middle of the year, but will rise again as the Xmas and New Year holidays approach.
Despite low inflation, the interest rates charged by commercial banks on their loans remain exorbitant. Sousa put the average interest on a 365 day bank loan in April at 23.84 per cent. Not only is this more than twice the 2006 rate of inflation, it is also a higher rate than the banks were charging the same time last year, when the same loan would have carried an average interest rate of 22.86 per cent.
On the other hand, the interest paid by banks on deposit accounts has risen somewhat - from an average of 11.11 per cent in April 2006 to 12.5 per cent a year later.
Sousa announced that, as from Monday, the central bank has cut its own key interest rate from 17.5 to 15.5 per cent, in the hope that this would encourage the commercial banks to reduce their interest rates.
As for the exchange rate, Sousa said that the Mozambican currency, the metical, had been stable. For the past six months it has been little changed, at around 25.8 meticais to the US dollar.
Furthermore, the official and the parallel exchange rates have tended to converge. In 2005, it was possible, on the illegal market in currency, to obtain over 27 per cent more meticais per dollar than was offered by the banks. That spread has now fallen to 3.1 per cent.
And nobody in their right mind should change South African rands on the parallel market - they are offering an exchange rate over nine per cent lower than that of the commercial banks.
As for the balance of payments, Sousa could point to a significant improvement, largely because exports rose by 5.6 per cent in the first quarter of 2007, compared with the same period in 2006, while imports fell by 2.8 per cent.
The gap is still considerable. Exports from January to March amounted to 564.8 million US dollars, and imports to 652.4 million dollars.
The improvement is largely due to one factory, the MOZAL aluminium smelter on the outskirts of Maputo. The value of aluminium exports rose from 321.1 million dollars in the first quarter of 2006 to 379.5 million in the first three months of this year - a rise of over 18 per cent. Since MOZAL was already working at near full capacity, this rise reflects the demand for, and hence increased prices of, aluminium on the world market.
Mozambique's electricity exports (to South Africa and Zimbabwe) rose from 38.4 to 61.6 million dollars - an increase of over 60.5 per cent. Exports of natural gas to South Africa rose from 15.8 to 18.8 million dollars (a 19.3 per cent increase).
Exports of timber rose by a remarkable 174 per cent - from 4.1 million dollars in January-March 2006 to 11.3 million this year. But given the repeated complaints of illegal logging, notably in Zambezia and Cabo Delgado provinces, this increase may not be entirely welcome.
Cashew nuts showed a mixed picture. Exports of the raw, unprocessed nuts fell by almost 48 per cent, from 20.3 to 10.6 million dollars. But the export of processed cashew kernels moved in the opposite direction, from 1.1 to 1.7 million dollars, an increase of 56 per cent.
There was a sharp fall in the exports of two other cash crops. Sugar exports earned 20.3 million dollars in the first quarter of 2006, but only 12.2 million in January-March this year. Over the same period tobacco exports fell from 23.2 to 3.3 million dollars. In both cases, it is entirely possible that the industries have large stocks that will be exported later in the year.
As for imports, the major categories of consumer goods imported (automobiles, medicines, grain, sugar and beer) rose in value from 73.8 to 94.6 million dollars, while capital goods imports rose from 65.1 to 70.7 million dollars.
Shockingly for a country as poor as Mozambique, there was an increase of almost 70 per cent in the import of automobiles. 27.9 million dollars worth of vehicles were imported in the first quarter of 2006, but this figure jumped to 46.9 million dollars in the first three months of this year.
Grain imports rose slightly, from 40 to 40.7 million dollars, while there were declines in sugar and beer imports, reflecting increased domestic production of these goods.
The reason for the overall decline in imports is that the country's megaprojects (such as MOZAL, and the natural gas refinery), kept separate in the statistics, imported less - a decline of 12 per cent from 174.3 to 152.9 million dollars.
Mozambique's bill for imported fuels also fell, from 68.2 to 61.7 million dollars.
SOURCE: AIM
