Mozambique sets to receive $60.7 million from IMF

Mozambique is set to receive about $60.7 million as the International Monetary Fund’s executive board wrapped up the third review of the country’s three-year loan program, allowing for an immediate disbursement.

The review brings total disbursements under the $456 million Extended Credit Facility program approved in 2022 to about $273 million, the IMF said late on Monday.

“Program performance has been satisfactory,” it said in a statement, adding that inflationary pressures had declined sharply and the economic recovery is accelerating.

Reuters news agency reported that the three-year arrangement by the global lender is expected to support economic recovery and policies to reduce public debt and financing vulnerabilities, while creating space for public investments in human capital, climate adaptation and infrastructure.

Following the Executive Board’s discussion, Mr. Bo Li, Deputy Managing Director and acting Chair, issued the following statement:

“The economic recovery is accelerating, supported by the liquified natural gas (LNG) projects amid modest non-mining growth. At the same time, inflation pressures have declined sharply. While the outlook remains positive, significant risks remain, mainly due to adverse climate events and the fragile security situation.

“The authorities are undertaking measures to ensure fiscal discipline over the short and medium term. Given Mozambique’s high debt and tight financing conditions, continued fiscal consolidation efforts are warranted. On the revenue side, broadening the VAT base will help mobilize revenues in an efficient way. On the expenditure side, continued wage bill reform will help create fiscal space for high-priority spending, including social spending.

“The monetary policy stance has helped to contain inflationary pressures and rebuild FX reserves. With inflation expectations well-anchored, a gradual easing of the tight stance is warranted. Implementing an appropriate and carefully calibrated policy mix between fiscal and monetary is key to preserving macroeconomic stability. Improving the transmission of the policy rate by deepening the interbank, money, and foreign exchange markets over the medium term remains important for improved macroeconomic management, and to allow greater exchange rate flexibility to cope with external shocks.

“Progress continued across the governance and fiscal structural agenda, including: (i) approval of the Sovereign Wealth Fund Law; (ii) submission to Parliament of amendments to the Public Probity law; (iii) progress on the recommended actions of the 2021 Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) Mutual Evaluation Report, and (iv) publication of the external audit reports for 2020 and 2021 COVID spending. Revenue administration, public financial management, wage bill spending, State Owned Enterprises, and debt management are key reform priorities to put fiscal policy on a stronger footing. Continued capacity development remains essential for strengthening institutional capacity and allowing Mozambique to achieve its development objectives.”