The International Monetary Fund (IMF) and the Mozambican government have decided to end consultations on the current aid plan and begin negotiations on a new programme. The announcement was made by the IMF, which revealed that discussions will begin soon.
According to a statement from the financial institution quoted by Lusa, “the Mozambican authorities have requested the start of discussions for a new IMF program, with the aim of better aligning support with the vision and priorities of the new Government of Mozambique”.
In addition, the IMF and the Mozambican Executive agreed not to continue with the subsequent reviews of the Extended Credit Facility (ECF). The reviews, which were planned under the current support program, were interrupted after an understanding between the two parties. An IMF team was in Mozambique between February 19 and March 4 to assess the implementation of policies under the ECF. After this mission, the organization continued to hold meetings remotely.
The first phase of the ECF program was approved in May 2022 and provided for total funding of 456 million dollars (28.8 billion meticals). So far, four installments of this amount have been released, with the last disbursement made in June 2024, amounting to 63.5 million dollars (4 billion meticals).
In January, the IMF concluded the third evaluation of the program, which allowed the third tranche of 60.7 million dollars (4.3 billion meticals) to be released. This brought total disbursements under the ECF to around 273 million dollars (19.6 billion meticals).
Despite the progress, the IMF warned of the urgent need for “budgetary consolidation” this year. The aim is to guarantee the sustainability of public accounts, which suffered a significant budgetary slippage in 2024, as Pablo Lopez Murphy, head of the IMF team, pointed out.
Murphy explained that preliminary estimates indicate that “there were significant budgetary slippages in 2024, partly due to the slowdown in economic activity in the last quarter”. He stressed that budget consolidation will be fundamental to guaranteeing the country’s macroeconomic stability.
In addition, the IMF pointed out that “slippages in payroll spending continue to divert resources from priority areas”. The organization recommended “rationalizing payroll spending and reducing tax exemptions” as necessary measures to sustain fiscal consolidation.
With regard to social spending, the IMF stressed the need to prioritize it. According to the financial institution, debt management also needs to be strengthened to avoid defaults. “The Mozambican authorities must work to maintain the country’s financial stability,” it added. On February 20, Mozambican President Daniel Chapo had stated that the IMF would continue to support the assistance program. However, the new conversions point to continued support in other ways, which will be defined with the new negotiations and will culminate in a new support program.
Lusa
