Relationship between the Prime Rate and the Economic Climate in Mozambique

Abstract

This study aims to analyze the relationship between the economic climate and the Prime Rate in Mozambique. The Mozambican economy has witnessed remarkable growth and diversification in recent years, with the "Prime Rate", the reference interest rate, emerging as a determining factor. This rate, influenced by the Bank of Mozambique, directly affects lending and financing rates, serving as a tool to regulate the money supply, consumption and investment. At the same time, the economic climate of Mozambican entities has also evolved, being shaped by economic, cultural and social factors. In Mozambique, this climate is influenced by cultural traditions, leadership patterns and the economic situation. Prime Rate fluctuation has direct implications for business investment: high rates can constrain investment and negatively affect the economic climate, while lower rates can boost investment and create a more optimistic work environment. From 2017 to 2021, Mozambique revealed an economy with great potential, anchored in sectors such as the mineral industry. Modern commerce, especially in cities like Maputo, and the service sector proved vital to the booming economy. However, the country faces challenges such as inadequate infrastructure and the need for skilled labor. The interactions between the "Prime Rate" and the Monetary Policy Interest Rate (MIMO) illustrate the importance of the financial system for the economic environment. Mozambique is at a crossroads, where effective management of resources and challenges will determine its position in the global economic scenario.