Press Release No. 11/122

Press Release: Statement by IMF Staff Mission to Mozambique

April 7, 2011

An International Monetary Fund (IMF) mission visited Mozambique during March 23–April 7, 2011 to conduct the 2011 Article IV consultation discussions and the second review under a three-year Policy Support Instrument (PSI) which was approved in June 2010. Policy discussions were held with the Minister of Finance, Hon. Manuel Chang; the Minister of Planning and Development, Hon. Aiuba Cuereneia; the Governor of the Bank of Mozambique, Hon. Ernesto Gouveia Gove; and other senior government officials. The mission held meetings with representatives of Parliament, the private sector, development partners and civil society, including labor unions and think tanks. It also traveled to the Northern Province of Tete where it met provincial authorities, the local private sector, and civil society. It also visited large mining projects and the Cahora-Bassa hydropower plant.

Mr. Johannes Mueller, Mission Chief for Mozambique, issued the following statement in Maputo at the conclusion of the mission:

“Mozambique continues to navigate well through stormy international waters. Economic growth in 2010, at an estimated 6½ percent, fell slightly short of expectations but was one of the highest in the region. Going forward, growth is projected to accelerate and return to levels observed before the global financial crisis. Buoyant megaproject exports offset the rising import bill related to surging fuel and food prices and significantly improved the external accounts, keeping international reserves at a comfortable level. This is projected to continue, as more such projects in the natural resource sector come online. However, recent increases in international food and fuel prices, through their secondary effects in the domestic economy, prevented a faster decline in inflation, which has continued to place a considerable burden on the most vulnerable segments of the population.

“With economic growth poised to return to pre-crisis levels, the authorities intend to keep economic policies relatively tight during 2011, with a view to arresting inflation expectations and allowing inflation to return to single-digit levels towards the end of the year. The mission concurs that the short-run focus on fighting inflation is appropriate. It also supports the authorities’ medium-term development strategy that is embedded in their economic program supported under the PSI. The strategy is based on stepping up public investment in infrastructure and priority social spending, as well as structural reforms in such areas as public financial management, tax administration and policy, debt management, economic governance, and financial sector development and supervision.

“The mission looks forward to the finalization of a new Poverty Reduction Strategy (PARP), which should be submitted to the Council of Ministers shortly. It welcomes the consultation with civil society and development partners in the process. Notwithstanding Mozambique’s high economic growth over the last two decades, poverty has not declined as fast as in other sub-Saharan African countries. We expect the PARP to address this issue by demonstrating Government’s commitment to more inclusive growth, with a view to generating employment opportunities and accelerating poverty reduction. This will require policies and reforms to raise production and productivity in labor-intensive industries, particularly agriculture. Broader, well targeted, and fiscally sustainable social protection systems could also help sustain economic development.

“The IMF's Executive Board is scheduled to discuss the second review of the PSI and the 2011 Article IV consultation in June 2011.”