Mozambique Advances Economic Recovery: IMF Completes Third Review

The IMF Executive Board completed the Third Review under Mozambique’s three-year Extended Credit Facility (ECF) arrangement, providing the country with access to SDR 45.44 million (about US$60.7 million). The ECF arrangement aims to support Mozambique’s economic recovery, reduce public debt, and foster higher and more inclusive growth through structural reforms. Program performance has been satisfactory, with important steps taken, such as the parliamentary approval of the Sovereign Wealth Fund bill in December 2023, ensuring transparent and sound management of natural resource wealth.

The Executive Board’s decision allows for an immediate disbursement of SDR 45.44 million, bringing Mozambique’s total disbursements under the ECF arrangement to SDR 204.48 million. Program performance has been solid, meeting structural benchmarks and quantitative performance criteria. The Executive Board approved a waiver for a missed performance criterion due to delays in debt service repayment. The Monetary Policy Consultation Clause (MPCC) was modified based on authorities’ requests, with inflation pressures decreasing faster than expected.

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Parliamentary approval of the Sovereign Wealth Fund bill is seen as a crucial step for transparent resource management. Continued fiscal consolidation efforts are recommended to reduce financing needs and control debt vulnerabilities. The outlook is positive, with risks including adverse climate events and security concerns. The authorities are urged to maintain fiscal discipline, broaden the VAT base, and reform the wage bill to create fiscal space for essential spending.

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Monetary policy has effectively contained inflationary pressures, allowing for a gradual easing of the tight stance. Improving the policy rate’s transmission by strengthening financial markets is highlighted for better macroeconomic management. Progress on governance and fiscal structural reforms is acknowledged, emphasizing the importance of capacity development for achieving Mozambique’s development objectives.