The Board of Directors of the IMF (International Monetary Fund) has concluded the first assessment under the three-year agreement signed within the scope of the Extended Credit Facility (ECF).
Mozambique met all program performance criteria, indicative targets and structural benchmarks for end-June 2022 and the IMF requested the amendment of the consultation clause on monetary policy, as well as the assessment of guarantees of funding for the country. The monetary policy orientation and the proactive adoption of more restrictive interest rates since the beginning of 2021 were initiatives considered adequate to combat inflation.
This positive assessment will allow for the immediate disbursement of US$59.49M, which can be used to support the state budget, bringing the total disbursements made under the ECF arrangement to about US$150.49M.
Despite the deterioration of the international economic environment and an increase in prices of raw materials, projections point to Mozambique’s economic growth in 2022, characterized by a strengthening economic recovery driven by a strong vaccination campaign and the total lifting of restrictions related to COVID-19 in July 2022.
Inflation rose to double digits, driven by global fuel and food prices, as well as tropical storms that affected domestic food supplies in the second quarter.
Fiscal developments in 2022 generally correspond to the fund’s expectations, with considerable revenues and well-controlled expenses.
The large LNG investments dominated the current account. In November 2022, Mozambique’s first LNG project started its production. Despite conditions being difficult, program implementation has been strong, with important milestones achieved in the areas of fiscal governance and the fight against corruption.
The risks to the outlook are considerable but balanced. The impact of fuel and food price inflation on other goods and services, social unrest, terrorist activity in the North, and natural disasters are risks posing a threat to the economic situation but are offset by favorable factors associated with the strengthening of economic recovery, the strong prospects for LNG demand and the possibility of higher-than-expected growth unrelated to LNG production in the medium term.