Press Release: Statement by IMF Deputy Managing Director Takatoshi Kato at the Conclusion of a Visit to Mozambique

July 26, 2005

Mr. Takatoshi Kato, Deputy Managing Director of the International Monetary Fund (IMF), made the following statement today in Maputo:

"This is my first visit to Mozambique and I would like to thank the authorities for their warm hospitality. At my meeting with President Armando Guebuza, I congratulated him on Mozambique's impressive progress in recent years. Real GDP growth over the past decade has averaged 8 percent—well above its regional peers—and the external position has improved further, against the backdrop of declining inflation. Sound macroeconomic policies and structural reforms, supported by successive programs under the IMF's Poverty Reduction and Growth Facility (PRGF) and substantial donor assistance, have underpinned this strong economic performance.

"I had very productive discussions with Prime Minister Luisa Diogo, Minister of Finance Manuel Chang, Minister of Planning and Development Aiuba Cuereneia, Central Bank Governor Adriano Maleiane, and other members of the government. I also met with members of the donor community and with civil society groups. Further, I had the chance to see at first hand some of the fine work being done in the District of Manhiça. The Centro de Investigação de Saúde de Manhiça I visited is a good example of the government and donors' efforts to do groundbreaking research on the region's most critical diseases and to improve health conditions in Mozambique. The Cooperativa de Bananas Eduardo Mondlane shows how the determination of Mozambicans to organize business activities can bear fruit.

"The progress we have seen is welcome; however, Mozambique is at a important juncture in its development, and several important challenges remain to be addressed. There is a need to press ahead with a second wave of structural reforms—by strengthening institutions and removing impediments to private economic activity—to sustain a high and broad-based growth and achieve substantial and lasting reductions in poverty and to achieve the Millennium Development Goals (MDGs).

"In my discussions with the authorities, I noted that a key and immediate challenge is to arrest the recent deterioration in fiscal performance and to renew efforts on fiscal consolidation. Raising the tax revenue-to-GDP ratio, strengthening tax administration, eliminating tax exemptions, and improving compliance are all needed actions. Enhanced revenue mobilization and improved expenditure management will also help reduce aid dependency over the medium term.

"Our discussions also covered the need to improve the business environment to increase private sector investments, and to help augment the capacity needed to absorb increased aid flows. This implies deepening of structural reforms, adopting more flexible labor regulations, improving governance through creation of an accountable judicial system and a transparent regulatory framework, and improving basic infrastructure especially in the agricultural sector.

"The President and his colleagues underscored to me their determination to respond to the challenges they face. It is my belief that with the appropriate policies, there is a clear opportunity to bring about macroeconomic stability and generate more rapid growth, and thus make possible the lasting reduction in poverty we all want to see. The IMF is committed to working with Mozambique towards realizing these goals."


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