Press Release No. 13/158

Press Release: Mozambique and IMF Team Reach Staff-Level Agreement on a new PSI Program

May 8, 2013

An International Monetary Fund (IMF) team visited Mozambique during April 24 to May 8, 2013 to conduct the 2013 Article IV consultation and the sixth and last review under the three-year Policy Support Instrument (PSI) that was approved in June 2010 (see Press Release No. 10/242). The mission also discussed with the authorities their economic program for 2013-16, and agreed—subject to approval by IMF Management and the Executive Board—that the program could be supported under a successor three-year PSI. 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 met with representatives of Parliament, the private sector, development partners, and civil society, including labor unions. The mission overlapped with the visit to Mozambique of First Deputy Managing Director, David Lipton, who also had productive discussions with the authorities (see Press Release No. 13/154).

Ms. Doris Ross, IMF Mission Chief for Mozambique, issued the following statement in Maputo at the conclusion of the mission:

“Mozambique’s economy remains robust, despite a still-fragile world economic environment resulting from the financial crisis that has shaken the international economy. Reflecting the rapid expansion in coal production as well as in financial services, transport and communications, and agriculture, Mozambique’s real gross domestic product (GDP) growth is estimated to have reached 7½ percent in 2012, one of the highest in the world and in the region. Severe floods in early 2013 have had a significant impact, destroying crops in the South and severely damaging infrastructure. But real GDP is still projected to grow by around 7 percent this year as mining expands further and overall agricultural production is set to recover speedily. Consumer price inflation slowed sharply from its peak of 16.6 percent at end-2010 to 2.2 percent in December 2012, one of the lowest in the region. This reflected the effects of determined monetary tightening in 2011, a good harvest and attendant increase in food supply, the relative stability of the metical in relation to leading currencies, favorable developments in international prices, and stable administered prices. This trend was halted in early 2013 as the floods pushed up food prices, though inflation is projected to remain low at around 5-6 percent over the medium term. External transactions are increasingly dominated by large investments in the mining and hydrocarbon sectors, financed mostly by foreign direct investment and private borrowing abroad.

“The mission commended the authorities’ continued commitment to prudent economic policies. The authorities intend to request the IMF’s continued support in the form of a new three-year PSI aligned with the Mozambican poverty reduction and development strategy. The new PSI would be supported by four pillars: (i) consolidating economic stability in the context of mineral resource exploration; (ii) attaining robust and more-inclusive growth; (iii) continuing institutional capacity building in macroeconomic policy formulation and implementation; and (iv) strengthening governance and public sector transparency.

“The mission supported the authorities’ economic program and its objectives, which emphasize sustained efforts to (i) maintain high public investment to address the huge infrastructure gap, while managing public borrowing prudently; (ii) continue to strengthen tax administration and public financial management systems aimed at increasing the fiscal space for high quality spending on infrastructure, agricultural development, health, education and job training, social protection, and other priority sectors; (iii) push forward the important structural and governance reforms to improve the business climate and facilitate job creation by the private sector outside megaprojects; (iv) broaden further access to financial services for depositors as well as borrowers; (v) strengthen Mozambique’s capacity to manage its rich natural resources and channel the benefits to the whole population; and (vi) increase production and productivity in agriculture.

“The IMF's Executive Board is expected to discuss the 2013 Article IV consultation, the final review under the current PSI, and Mozambique’s request for a new three-year PSI in late June 2013.

“The mission thanks the authorities and other interlocutors for the constructive discussions and their warm hospitality.”