The International Monetary Fund (IMF) warned on Saturday, November 22, that Mozambique’s financing challenges have become “acute,” advocating for “decisive and coordinated policy actions” to reignite economic growth and harness the benefits of the gas megaprojects, reported Lusa.
“Government financing challenges have become acute; decisive and coordinated policy actions are essential to restore macroeconomic stability and address external imbalances,” IMF staff stated in a note released following their visit to the country for discussions on the publication of the Article IV report, the IMF’s annual economic review of its members.
Economic activity, said the mission led by Pablo Lopez-Murphy, “is gradually recovering from a sharp contraction during the last quarter of 2024, and inflationary pressures are moderate.” Economic growth, the Fund predicts, will “remain moderate, as challenges such as a constrained financing environment, political uncertainty, and foreign exchange shortages are preventing faster growth.”
The macroeconomic environment is “complex,” the IMF noted, pointing out that although inflation remains controlled and economic activity is gradually recovering from post-presidential election confrontations at the end of last year, “growth remains moderate” and the economic outlook “is marked by significant uncertainty.”
In the note, which still needs approval from the IMF management before the full annual economic analysis is released, the Fund’s country mission chief also wrote that the resumption of operations by TotalEnergies and the lifting of the ‘force majeure’ by Exxon offer “potential medium-term growth stimulus,” as does Mozambique’s recent removal from the grey list of the Financial Action Task Force (FATF) due to authorities’ efforts to combat money laundering and terrorism financing.
In the context of discussions with the IMF on launching a new external financing program, the Fund stated that “a coordinated policy package, including urgent fiscal consolidation while simultaneously protecting the most vulnerable and poor, greater exchange rate flexibility, and structural reforms to improve governance and promote private-sector-led growth, would help Mozambique address its challenges.”
This policy package, it added, could help overcome Mozambique’s “significant challenges,” namely the “high fiscal and debt vulnerabilities, including overdue government payments, which continue to weigh on the country’s short-term growth prospects, and exchange rate pressures, which increase these challenges.”
“Without decisive policy action, vulnerabilities could worsen, compromising macroeconomic stability and the population’s well-being,” the IMF concluded, which in October projected economic growth of 2.5% for this year and inflation of 4.9%.
Source: Diário Económico
