IMF Staff Completes Visit to Mozambique

IMF News, May 16, 2024

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IMF team led by Mr. Pablo Lopez Murphy conducted discussions from May 2 to May 15, 2024, with Mozambican authorities on policies underpinning the Fourth Review under the Extended Credit Facility (ECF)-supported arrangement.
End-of-mission statement issued by Mr. Pablo Lopez Murphy summarizing constructive and fruitful discussions.
The mission met with Prime Minister Adriano Maleiane, Minister of Economy and Finance Max Tonela, Governor of the Bank of Mozambique Rogerio Zandamela, other senior officials, and representatives of civil society, political parties, development partners, and the private sector.
The team will continue discussions virtually and through the Resident Representative Office in Maputo.

Mozambique’s economic growth projection:
- 4.3 percent in 2024.
Non-mining GDP growth:
- 2.8 percent in 2023 and expected to accelerate to 3.5 percent in 2024.
Extractive sector outlook:
- Medium-term outlook is strong as large LNG projects are expected to resume activities.
Inflation and monetary developments:
- Inflation reached 3.3 percent in April 2024.
- The Bank of Mozambique reduced the policy rate by 150 basis points in the first quarter of 2024.
- Nominal policy rate at 15.75 percent.
- High reserve requirements remain; overall monetary stance described as tight.
- With inflation expectations well anchored, fiscal consolidation continuing, and credit to the private sector decreasing, further easing of monetary policy would be appropriate.

Fiscal consolidation and past adjustment:
- A fiscal correction of around 3 percentage points of GDP took place in 2023.
- Further fiscal consolidation in 2024 is necessary to secure fiscal and debt sustainability and preserve macroeconomic stability.
Public wage bill and spending composition:
- Challenges implementing the new single salary scale have resulted in wage bill spending overruns, crowding out important spending priorities including social transfers and infrastructure.
- Recommendation: Rationalizing wage bill spending should underpin fiscal consolidation; social spending should be prioritized.
Debt management:
- Recommendation: Debt management could be further strengthened to avoid arrears.

Sovereign Wealth Fund (SWF) developments:
- SWF Law approved in December 2023 to help manage LNG revenues.
- Secondary legislation necessary to implement the SWF law has been finalized and will be sent to the Council of Ministers for approval.
Program progress:
- The government has made progress on structural reforms set out under the program.

Fiscal policy:
- Continue fiscal consolidation in 2024 to secure fiscal and debt sustainability.
- Rationalize wage bill spending to avoid crowding out social transfers and infrastructure.
- Prioritize social spending.
- Strengthen debt management to avoid arrears.
Monetary policy:
- Given anchored inflation expectations, ongoing fiscal consolidation, and decreasing credit to the private sector, further easing of monetary policy would be appropriate.
Structural/administrative:
- Finalize and approve secondary legislation for the SWF law through the Council of Ministers.
Implementation and engagement:
- Continue virtual discussions in the coming weeks to complete the Fourth Review of the ECF arrangement.

IMF staff statement following the mission to Maputo, May 2–May 15, 2024.