The International Monetary Fund (IMF) on Monday, January 8, approved the third review of the financing programme for Mozambique, guaranteeing the “immediate disbursement” of 60.7 million dollars for budgetary support.
“The Executive Board concluded the third review of the implementation of the Extended Credit Facility (ECF) programme for Mozambique. With this new amount, total disbursements to the country will rise to 273 million dollars,” said the institution in a statement published by Lusa.
According to the institution, the programme’s performance has been satisfactory: “five of the eight structural benchmarks were met at the end of December 2023, and three of the four quantitative performance criteria were met”.
“Economic recovery is accelerating, supported by liquefied natural gas (LNG) projects in a context of modest non-mining growth. At the same time, inflationary pressures have declined markedly. Although the outlook remains positive, significant risks remain, mainly due to adverse weather events and the fragile security situation,” warned the IMF’s deputy managing director, Bo Li, quoted in the same communiqué.
The source recalled that this technical assistance programme “aims to support Mozambique’s economic recovery and reduce public debt and financing vulnerabilities, while promoting higher and more inclusive growth through structural reforms”.
The deputy executive director also recognised that the Mozambican authorities “are taking steps to ensure fiscal discipline in the short and medium term, but that given the country’s high debt and tight financing conditions, continued fiscal consolidation efforts are needed”.
“On the revenue side, the broadening of the VAT base will help to mobilise revenue efficiently. On the expenditure side, continuing to reform the wage bill will help create fiscal space for high-priority spending, including social spending,” Bo Li pointed out.
He argued that the “monetary policy stance has helped contain inflationary pressures and rebuild foreign exchange reserves and that, with inflation expectations well anchored, a gradual easing of restrictive policy is justified”.
“Implementing an appropriate and carefully calibrated fiscal and monetary policy mix is key to preserving macroeconomic stability. Improving the transmission of the key rate by deepening the interbank, money and foreign exchange markets over the medium term remains important for better macroeconomic management and allowing greater exchange rate flexibility to cope with external shocks,” he concluded.
This programme was approved in May 2022 and provides total funding of 456 million dollars for Mozambique.
