{
  "title": "IMF Executive Board Concludes 2022 Article IV Consultation with the Republic of Mozambique and Approves US$456 Million Extended Credit Facility Arrangement",
  "publication": "IMF News, May 9, 2022",
  "sourceUrl": "https://www.imf.org/en/news/articles/2022/05/09/pr22145-mozambique-article-iv-consultation-and-ecf",
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  "summary": "IMF Executive Board Concludes 2022 Article IV Consultation with the Republic of Mozambique and Approves US$456 Million Extended Credit Facility Arrangement",
  "publishDate": "2022-05-09",
  "sections": [
    {
      "heading": "Arrangement approval and purpose",
      "content": "- The IMF Executive Board approved a three-year Extended Credit Facility (ECF) arrangement for the Republic of Mozambique of SDR 340.8 million (about US$456 million), equivalent to 150 percent of the country’s quota.\n- An immediate disbursement of SDR 68.16 million (about US$91 million) is available upon approval.\n- The arrangement aims to:\n  - Support the economic recovery.\n  - Reduce public debt and financing vulnerabilities.\n  - Create space for priority investments in human capital, climate adaptation and infrastructure.\n  - Catalyze additional financing by development partners."
    },
    {
      "heading": "Policy focus and reform priorities supported by the program",
      "content": "- Key policy actions and reforms supported:\n  - Establishing a sovereign wealth fund to transparently manage LNG wealth.\n  - Mobilizing additional tax revenue and removing distortionary tax exemptions.\n  - Strengthening public financial management and governance.\n  - Strengthening management of state-owned enterprises and their debts.\n  - Improving fiscal risk management and debt transparency.\n  - Buttressing the anti-money laundering/combating the financing of terrorism (AML/CFT) framework.\n  - Further governance reforms and anti-corruption measures.\n- Fiscal policy stance:\n  - Envisages a moderate pace of fiscal adjustment that balances sustaining activity with reducing debt and financing vulnerabilities.\n  - Maintains space for social protection spending for the most vulnerable households.\n  - Authorities committed to a sovereign wealth fund and advised to complement this with a framework to weather commodity price volatility and consider a fiscal rule.\n- Monetary and financial sector policy:\n  - The Bank of Mozambique raised its policy rate 200 basis points in March 2022.\n  - The IMF described the prudent monetary stance as warranted given rising inflationary pressures.\n  - The Bank’s pursuit of adopting an inflation targeting regime is commended.\n  - Continued efforts recommended to strengthen financial sector supervision, promote financial inclusion, and address AML/CFT weaknesses."
    },
    {
      "heading": "Macroeconomic developments and outlook",
      "content": "- Growth and COVID-19:\n  - Real GDP contracted -1.2 percent in 2020, the first in 30 years; growth resumed in 2021 and is becoming more broad-based.\n  - Vaccine rollout intensified in late 2021 with 46 percent of the population having received at least one shot (42 percent fully vaccinated by end-March 2022).\n  - Poverty increased from a poverty headcount ratio of 61.9 percent in 2019 to an estimated 63.3 percent in 2020.\n- Inflation and external shocks:\n  - Inflation rose to 6.7 percent year-on-year in March 2022, driven by rising global prices and the impact of tropical storms on local food prices.\n  - The war in Ukraine is pushing up fuel and food prices.\n- Medium-term prospects:\n  - Growth excluding extractive industries is expected to rise to about 4.0 percent per year.\n  - Higher overall growth rates are expected from large liquefied natural gas (LNG) projects set to begin production later in 2022.\n- Vulnerabilities and risks:\n  - Significant risks include security concerns, high debt levels, and vulnerability to natural disasters.\n  - The country is highly vulnerable to natural disasters; building climate resilience is critical."
    },
    {
      "heading": "Executive Board assessment and recommendations",
      "content": "- Directors welcomed prudent macroeconomic policy management and reform implementation despite challenging conditions.\n- Directors encouraged:\n  - Maintaining focus on macroeconomic stability.\n  - Accelerating reforms to promote inclusive growth, address governance and corruption concerns, and strengthen management of public resources.\n  - Growth-friendly fiscal consolidation and measures to reduce public debt vulnerabilities.\n  - Continued reforms in tax administration and public financial management.\n  - Transparent management of future LNG resources through a sovereign wealth fund and adoption of a fiscal rule to mitigate commodity price volatility.\n  - Continued efforts to implement measures from the “Diagnostic Report on Transparency, Governance and Corruption” and follow up on findings from the audit report on COVID-19 related spending.\n  - Strengthening financial sector supervision and addressing AML/CFT framework weaknesses."
    },
    {
      "heading": "Mozambique: Selected Economic Indicators (by year)",
      "content": "- National income and prices\n  - Nominal GDP (MT billion): 2018 896; 2019 963; 2020 975; 2021 1,054; 2022 1,173\n  - Real GDP growth (percentage change): 2018 3.4; 2019 2.3; 2020 -1.2; 2021 2.2; 2022 3.8\n  - Consumer price index (percentage change, end of period): 2018 3.5; 2019 6.7; 2020 9.0; 2021\n- Government Operations (percent of GDP)\n  - Total revenue: 2018 23.8; 2019 28.7; 2020 24.5; 2021 25.3; 2022 25.0\n  - Total expenditure and net lending: 2018 31.3; 2019 29.8; 2020 33.2; 2021 30.6; 2022 32.4\n  - Overall balance, after grants: 2018 -7.3; 2019 0.3; 2020 -5.4; 2021 -4.4; 2022 -3.6\n  - Primary Balance after grants: 2018 -2.9; 2019 -2.3; 2020 -1.8; 2021 -0.2; 2022\n- Public sector debt\n  - Public sector debt: 2018 106.7; 2019 99.0; 2020 121.1; 2021 104.2; 2022 101.4\n  - of which: external: 2018 86.2; 2019 79.4; 2020 98.7; 2021 81.1; 2022 77.6\n- Money and Credit\n  - Reserve money (percentage change): 2018 22.5; 2019 19.1; 2020 -14.4; 2021 10.7\n  - M3 (Broad Money) (percentage change): 2018 8.2; 2019 12.1; 2020 23.6; 2021 2.8; 2022 12.0\n  - Credit to the economy (percentage change): 2018 -2.5; 2019 5.0; 2020 14.8; 2021 3.0; 2022 8.7\n  - Credit to the economy (percent of GDP): 2018 24.6; 2019 24.0; 2020 27.2; 2021 25.9\n- External sector (percentage change)\n  - Merchandise exports: 2018 10.0; 2019 -10.2; 2020 -23.1; 2021 55.5; 2022 20.1\n  - Merchandise exports, excluding megaprojects: 2018 20.2; 2019 8.3; 2020 -22.0; 2021 42.7; 2022 15.9\n  - Merchandise imports: 2018 18.1; 2019 9.5; 2020 -12.9; 2021 65.7\n  - Merchandise imports, excluding megaprojects: 2018 8.9; 2019 9.3; 2020 -4.5; 2021 37.9; 2022 7.8\n  - External current account, after grants (percent of GDP): 2018 -30.3; 2019 -19.1; 2020 -27.6; 2021 -22.4; 2022 -44.9\n  - Net international reserves (millions of U.S. dollars, end of period): 2018 2,885; 2019 3,605; 2020 3,493; 2021 2,927; 2022 2,400\n  - Gross international reserves (millions of U.S. dollars, end of period): 2018 3,081; 2019 3,884; 2020 4,070; 2021 3,470; 2022 3,076\n\nPress Release No. 22/145; May 9, 2022. IMF Communications Department.\n\n---\n\n\n References\n\n- Republic of Mozambique and the IMF\n- IMF Policy Advice -- A Factsheet\n- Special Drawing Rights (SDRs) -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2022/05/09/pr22145-mozambique-article-iv-consultation-and-ecf"
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    "Published: May 9, 2022",
    "The IMF Executive Board approved a three-year Extended Credit Facility (ECF) arrangement for the Republic of Mozambique of SDR 340.8 million (about US$456 million), equivalent to 150 percent of the country’s quota.",
    "An immediate disbursement of SDR 68.16 million (about US$91 million) is available upon approval.",
    "The arrangement aims to:",
    "Key policy actions and reforms supported:",
    "Fiscal policy stance:",
    "Monetary and financial sector policy:",
    "Growth and COVID-19:",
    "Inflation and external shocks:",
    "Medium-term prospects:",
    "Vulnerabilities and risks:",
    "Directors welcomed prudent macroeconomic policy management and reform implementation despite challenging conditions.",
    "Directors encouraged:",
    "National income and prices",
    "Government Operations (percent of GDP)",
    "Public sector debt",
    "Money and Credit",
    "External sector (percentage change)",
    "[Republic of Mozambique and the IMF](http://www.imf.org/external/country/MOZ/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Special Drawing Rights (SDRs) -- A Factsheet](https://www.imf.org/en/about/factsheets/sheets/2023/special-drawing-rights-sdr)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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