- IMF staff and the Mozambican authorities have discussed performance and policies underpinning the Fourth Review of the ECF arrangement. Discussions were fruitful and will continue virtually in the coming weeks.
Maputo: An International Monetary Fund (IMF) team, led by Mr. Pablo Lopez Murphy, conducted discussions from May 2 to May 15, 2024, with the Mozambican authorities on policies underpinning the Fourth Review under the Extended Credit Facility (ECF)-supported arrangement.
At the end of the IMF team's visit to Maputo, Mr. Lopez Murphy issued the following statement:
"The IMF team has held constructive and fruitful discussions with the Mozambican authorities on the economic, financial, and structural policies needed to support the completion of the Fourth Review of the ECF arrangement.
"Mozambique's economic growth remains resilient and is projected at 4.3 percent in 2024. Non-mining GDP growth is expected to accelerate from 2.8 percent in 2023 to 3.5 percent in 2024, as tight financial conditions continue to weigh on economic activity. The medium-term outlook for the extractive sector is strong as large LNG projects are expected to resume activities.
"A fiscal correction of around 3 percentage points of GDP took place in 2023. Further fiscal consolidation in 2024 is necessary to secure fiscal and debt sustainability and preserve macroeconomic stability. Challenges in implementing the new single salary scale have resulted in wage bill spending overruns, which are crowding out important spending priorities including social transfers and infrastructure. Rationalizing wage bill spending should underpin fiscal consolidation, social spending should be prioritized, and debt management could be further strengthened to avoid arrears.
"Inflation has been low for several months, reaching 3.3 percent in April 2024. The Bank of Mozambique has started easing monetary policy, reducing the policy rate by 150 basis points in the first quarter of 2024. However, with the nominal policy rate at 15.75 percent and high reserve requirements, the overall monetary stance remains tight. With inflation expectations well anchored, fiscal consolidation continuing, and credit to the private sector decreasing, further easing of monetary policy would be appropriate.
"The government has made progress on structural reforms set out under the program. A Sovereign Wealth Fund (SWF) Law, approved in December 2023, will help manage LNG revenues. Secondary legislation necessary to implement the SWF law has been finalized and will be sent to the Council of Ministers for approval.
"The IMF staff team met with Prime Minister Adriano Maleiane, Minister of Economy and Finance Max Tonela, Governor of the Bank of Mozambique Rogerio Zandamela, and other senior officials. The mission also met with representatives of civil society, political parties, development partners, and the private sector.
"The team wishes to thank the Mozambican authorities for their excellent cooperation and for the frank and constructive dialogue during the mission. The team will continue its discussions in the context of the Fourth Review virtually and through the Resident Representative Office in Maputo."
