IMF Executive Board Completes Fourth Review under Extended Credit Facility and concludes 2024 Article IV Consultation with Mozambique
IMF News, July 8, 2024
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- Published: July 8, 2024
Program decision and financing
- The Executive Board completed the Fourth Review under the Extended Credit Facility (ECF) Arrangement and approved immediate disbursement of SDR 45.44 million (about US$60.03 million), usable for budget support.
- Total disbursements under the ECF arrangement to date: SDR 249.92 million (about US$330.14 million).
- The three-year ECF arrangement aims to support Mozambique’s economic recovery, reduce public debt and financing vulnerabilities, and foster higher and more inclusive growth through structural reforms.
Program performance and waivers
- Structural benchmarks (SBs): Three of four SBs were met as of end-June 2024.
- Quantitative performance criteria (QPCs): Two of four QPCs were observed.
- Waivers approved by the Executive Board for two nonobservances:
- Waiver for nonobservance of the continuous performance criterion on non-accumulation of new public and publicly guaranteed external payment arrears — missed due to operational constraints related to debt management.
- Waiver for nonobservance of the performance criterion on the domestic primary balance — missed, in part, due to higher than expected wage-bill spending and debt service.
- The Executive Board completed the financing assurances review and approved the authorities’ requests for modification of the MPCC and the quantitative performance criterion on domestic primary budget balance.
Macroeconomic outlook and policy stance
- Inflation: Continued to moderate and was within the Monetary Policy Consultation Clause (MPCC) band.
- Growth: Economic growth is positive but expected to moderate, with tight financial conditions acting as a drag on activity.
- Risks: Significant risks stem mainly from adverse climate events and the fragile security situation.
- Monetary policy:
- A tight monetary policy stance has helped contain inflationary pressures and rebuild FX reserves.
- With weak non-mining growth, well-anchored inflation expectations, and continued fiscal consolidation, a gradual easing of the monetary policy stance is appropriate.
- Improving monetary policy transmission by deepening the interbank, money, and foreign exchange markets is important.
- Allowing greater exchange rate flexibility is necessary to enhance resilience to external shocks.
- Fiscal policy:
- Further fiscal consolidation is warranted to reduce financing needs and contain debt vulnerabilities, while creating fiscal space for social spending to protect the most vulnerable.
- Revenue mobilization and wage bill spending rationalization are essential to create fiscal space for high-priority social and development spending.
- Improving social spending execution and avoiding future arrears remain paramount.
- Other policy priorities:
- Further progress in enhancing the AML/CFT framework is warranted.
- Continued capacity development, including in the operation of the Sovereign Wealth Fund, is essential for strengthening institutional capacity.
- Measures to build resilience to climate change and accelerate progress on addressing gender-based disparities are crucial.
Structural and governance progress
- Notable reforms and steps:
- Publication of a Decree Law requiring the collection of beneficial ownership information.
- Publication of financial risk indicators of state-owned enterprises (SOEs).
- Monthly cash flow forecasts by Treasury to inform budget execution.
- Emphasis on strengthening: revenue administration, public financial management, debt management, and SOE operations.
- Continued capacity development needed for effective Sovereign Wealth Fund operation and broader institutional strengthening.
Discussion priorities from the 2024 Article IV Consultation
- Wage bill rationalization for a sustainable and cost-effective provision of public services.
- The role of state-owned enterprises (SOEs) and policies to improve their governance and transparency.
- Drivers of exchange rate stability since mid-2021.
Republic of Mozambique: Selected Economic Indicators, 2020–24
National income and prices
- Nominal GDP (MT billion): 989 (2020); 1,058 (2021); 1,206 (2022); 1,339 (2023); 1,425 (2024 Proj.)
- Real GDP growth (percentage change): -1.2 (2020); 2.4 (2021); 4.4 (2022); 5.4 (2023); 4.3 (2024 Proj.)
- Consumer price index (percentage change, end of period): 7.3 (2020); 10.9 (2021); 3.6 (2022); (blank for 2023 in source); (blank for 2024 in source)
Government Operations (percent of GDP)
- Total revenue: 23.8 (2020); 25.1 (2021); 23.7 (2022); 24.5 (2023); 25.6 (2024 Proj.)
- Total expenditure and net lending: 32.2 (2020); 30.8 (2021); 32.8 (2022); 33.2 (2023); 32.9 (2024 Proj.)
- Overall balance, after grants: -4.8 (2020); -4.6 (2021); -5.3 (2022); -4.3 (2023); -3.7 (2024 Proj.)
- Primary Balance after grants: -1.9 (2020); -5.2 (2021); -0.3 (2022); -0.1 (2023); (blank for 2024 in source)
- Public sector debt: 120.0 (2020); 104.3 (2021); 100.3 (2022); 93.9 (2023); 97.5 (2024 Proj.)
- of which: external: 97.3 (2020); 80.8 (2021); 72.1 (2022); 66.4 (2023); 65.9 (2024 Proj.)
Money and Credit
- Reserve money (percentage change): 9.0 (2020); -14.3 (2021); 0.6 (2022); 117.8 (2023); -13.0 (2024 Proj.)
- M3 (Broad Money) (percentage change): 23.3 (2020); 1.9 (2021); 8.7 (2022); 3.3 (2023); 4.0 (2024 Proj.)
- Credit to the economy (percentage change): 13.1 (2020); 5.2 (2021); -2.2 (2022); -5.0 (2023); (blank for 2024 in source)
- Credit to the economy (percent of GDP): 26.2 (2020); 25.8 (2021); 23.5 (2022); 20.7 (2023); 18.5 (2024 Proj.)
External sector (percent of GDP)
- Merchandise exports: 26.1 (2020); 35.3 (2021); 43.9 (2022); 39.5 (2023); 37.2 (2024 Proj.)
- excluding megaprojects: 8.5 (2020); 10.3 (2021); 11.2 (2022); 9.8 (2023); (blank for 2024 in source)
- Merchandise imports: -41.3 (2020); -48.5 (2021); -70.6 (2022); -43.8 (2023); -45.6 (2024 Proj.)
- External current account, after grants: -26.2 (2020); -20.5 (2021); -36.4 (2022); -11.6 (2023); -30.8 (2024 Proj.)
- Net international reserves (millions of U.S. dollars, end of period): 3,493 (2020); 2,927 (2021); 2,333 (2022); 2,933 (2023); 2,821 (2024 Proj.)
- Gross international reserves (millions of U.S. dollars, end of period): 4,070 (2020); 3,470 (2021); 2,888 (2022); 3,510 (2023); 3,508 (2024 Proj.)
Source: IMF Executive Board press release, July 8, 2024.
