Mozambique’s central bank has held its benchmark MIMO rate steady at 9.25% ($0.09 equivalent in policy cost terms, though expressed as a percentage), marking the first pause in an aggressive easing cycle that began in late 2023 when the rate stood at 17.25%. The decision, announced on March 23, 2026, underscores a shift toward caution as domestic shocks and imported inflation pressures threaten to reverse two years of subdued price growth.
Annual inflation edged up to 3.20% in February 2026 from 3.04% the prior month, still well below the 5% threshold it has held since late 2023. Yet the Monetary Policy Committee (MPC) cited “materialisation and substantial exacerbation” of risks, including the worst flooding in at least 25 years, post-election unrest, and the imminent closure of the Mozal aluminium smelter, which accounts for one-fifth of the country’s export earnings.
The Mozal shutdown
The Mozal shutdown, effective March 15, 2026, removes a critical pillar of the economy. Aluminium exports generated approximately $1.29 billion in 2024 (MZN 82.3 billion at the prevailing exchange rate of roughly MZN 63.80 per USD).
The plant contributes around 4% to GDP and supports thousands of direct and indirect jobs. Its loss is expected to widen the current-account deficit, pressure foreign-exchange reserves, and amplify imported cost-push effects from fuel and fertilisers, all of which Mozambique imports entirely.
Governor Rogério Zandamela emphasised a “cautious approach to preserve macroeconomic stability amid uncertain conditions.” The MPC explicitly suspended the easing cycle launched in January 2024, conditioning future moves on the evolution of both domestic and external risks. This contrasts sharply with the prior 13 consecutive cuts that brought borrowing costs to their lowest level since 2015, aimed at stimulating growth amid single-digit inflation.
Critically, the timing exposes structural vulnerabilities. Mozambique’s economy grew just 0.5% in 2025, down from 2.1% the previous year, according to IMF estimates. Reliance on commodity exports; aluminium, coal and emerging LNG projects leaves it exposed to external shocks. The Middle East conflict has already driven up global energy and food prices, feeding through to Mozambique’s import bill and raising the spectre of further metical depreciation.
In February, the IMF explicitly advised greater exchange-rate flexibility to absorb these pressures. The metical has traded around MZN 63.80 per USD in recent weeks, but sustained capital outflows or export shortfalls could accelerate weakening, importing yet more inflation. By holding rates, the central bank is prioritising stability over immediate growth support, a defensible stance given early signs of price reacceleration, but one that risks prolonging sluggish recovery in a climate-stressed, debt-burdened economy.
Macro outlook
For global investors and multilateral lenders, the pause signals a more hawkish tilt ahead. While inflation remains anchored near 3.2%, the combination of climate events, industrial disruption and geopolitical spillovers tests the limits of monetary easing in one of Africa’s most aid- and commodity-dependent nations.
Future MPC meetings will hinge on whether these shocks prove transitory or entrenched and whether the metical’s flexibility, as urged by the IMF, becomes the next line of defence.
