Statement by IMF Staff Mission to Mozambique

Press Release No. 11/372
October 19, 2011

An International Monetary Fund (IMF) mission visited Mozambique during October 5–19, 2011 to conduct the third 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, several line ministers, and other senior government officials. The mission also met with representatives of Parliament, the private sector, development partners and civil society, including labor unions.

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

“Mozambique remains resilient to the weakening global economic prospects. Economic growth could reach 7¼ percent this year and further accelerate over the medium term, helped by strong public investment and activity of megaprojects in the natural resource sector. Benefiting the poor in particular, headline inflation has decelerated sharply, from 16½ percent at end-2010 to less than 8 percent at end-September 2011. This reflected favorable developments of international prices, a good harvest, a stronger metical and, importantly, the authorities’ prudent fiscal and monetary policy stance. However, core inflation (excluding food and fuel products) remains relatively high and needs to be brought down further. An acceleration of both megaproject and traditional exports helped offset the increase in the import bill for fuel products and megaproject investments, keeping external accounts in line with initial projections. This, together with robust capital inflows, contributed to a stronger-than-projected international reserves position.

“The mission welcomes the authorities’ commitment to continue to pursue prudent fiscal and monetary policies aimed at further moderating inflation expectations. This will also position Mozambique well should there be any spillovers from the weakening external outlook that may require adjustments in policies. For 2012 and beyond, the mission agrees with the authorities’ intention to promote public investment, social development, and financial deepening to help broaden economic activity and allow more Mozambicans to benefit from economic growth. The mission broadly supports the fiscal policy stance underlying the 2012 budget law and emphasizes the need to ensure that the budget appropriately reflects the priorities under the Poverty Reduction Strategy (PARP). It also urges forceful implementation of the PARP, including the intended expansion of social protection systems that are considered well targeted to assist those in need.

“The mission agrees with the authorities that their current focus in the structural reform area should be maintained. It welcomes the authorities’ intentions to further strengthen public finance management, tax administration, debt management and investment project selection, natural resource management, and the framework to fight corruption and money laundering.

“The IMF's Executive Board is scheduled to consider the third review of the PSI in December 2011.”



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