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IMF: “Mozambique’s Public Debt Could Increase by 97.5% of GDP in 2024”

IMF: “Mozambique’s Public Debt Could Increase by 97.5% of GDP in 2024”

The International Monetary Fund (IMF) said that it estimates that the public debt stock will grow this year to the equivalent of 97.5 per cent of Gross Domestic Product (GDP), and therefore advocates the implementation of measures to “strengthen” the country’s fiscal policy.

“Efforts to strengthen revenue administration, public finance management, debt management and the operations of public companies are essential to strengthening fiscal policy,” said the IMF’s deputy executive director, Bo Li, quoted in the institution’s press release published on Tuesday, 9 July, by Lusa.

In the document, the IMF forecasts economic growth for Mozambique of 4.3 per cent of GDP this year, compared to 5.4 per cent in 2023, adding that inflation should fall to 3.6 per cent, compared to 4.3 per cent last year and far from the peak of 10.9 per cent in 2022.

“A restrictive monetary policy stance has helped contain inflationary pressures and rebuild foreign exchange reserves. Given the weak outlook for non-mining growth, well-anchored inflation expectations and continued fiscal consolidation, a gradual easing of the monetary policy stance is appropriate,” he said.

The IMF’s deputy executive director emphasised that “a combination of fiscal and monetary policies, carefully calibrated, are fundamental to preserving macroeconomic stability” in Mozambique.

“Improving the transmission of monetary policy by deepening the interbank, money and foreign exchange markets remains important for better macroeconomic management. Greater exchange rate flexibility is needed to increase resilience to external shocks,” he added.

The IMF forecasts economic growth for Mozambique of 4.3 per cent of GDP this year, down from 5.4 per cent in 2023, adding that inflation should fall to 3.6 per cent, down from 4.3 per cent last year and far from the peak of 10.9 per cent in 2022

Bo Li recognised that “more progress is also needed” in the country in terms of combating money laundering and terrorist financing.

“Progress has been made recently on the entire structural fiscal and governance agenda, including the publication of a decree law requiring the collection of information on the beneficial owners of companies, the publication of financial risk indicators for public companies and monthly cash flow forecasts from the Treasury to report on budget execution,” he emphasised.

On Monday, July 8, the IMF guaranteed that it would immediately disburse another 60 million dollars (3.7 billion meticals) in support to Mozambique under the country’s assistance programme.

“The executive board concluded the regular consultation process with Mozambique for 2024 and the fourth review of the Extended Credit Facility (ECF) agreement 36 months ago, allowing for an immediate disbursement equivalent to 60.03 million dollars usable for budget support, bringing total disbursements to the country to 330.1 million dollars,” the institution said in a statement.

The three-year ECF agreement aims to support Mozambique’s economic recovery and reduce public debt and financing vulnerabilities, while promoting higher and more inclusive growth through structural reforms.

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This programme was approved in May 2022 and provides total financing of 456 million dollars to Mozambique.

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