{
  "title": "IMF Executive Board Concludes the First Review under the Extended Credit Facility Arrangement for the Republic of Mozambique",
  "publication": "IMF News, November 21, 2022",
  "sourceUrl": "https://www.imf.org/en/news/articles/2022/11/21/pr22403-mozambique-imf-executive-board-concludes-first-review-under-ecf-arrangement",
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  "summary": "IMF Executive Board Concludes the First Review under the Extended Credit Facility Arrangement for the Republic of Mozambique",
  "publishDate": "2022-11-21",
  "sections": [
    {
      "heading": "Review outcome and financing",
      "content": "- The Executive Board completed the first review under the three-year Extended Credit Facility (ECF) arrangement for Mozambique.\n- The Board completed the financing assurances review and approved the authorities’ request for modification of conditionality.\n- Immediate disbursement: SDR 45.44 million (about US$59.26 million) usable for budget support.\n- Total disbursements under the ECF arrangement after this review: SDR 113.6 million (about US$150million)."
    },
    {
      "heading": "Objectives of the ECF arrangement",
      "content": "- The three-year ECF arrangement aims to:\n  - Support the economic recovery,\n  - Reduce public debt and financing vulnerabilities,\n  - Foster higher and more inclusive growth through structural reforms."
    },
    {
      "heading": "Program performance and implementation",
      "content": "- All end-June 2022 program performance criteria, indicative targets and the structural benchmark were met.\n- Program implementation highlights:\n  - Completion of important program commitments in fiscal governance and anti-corruption.\n  - Strong program performance despite a challenging environment."
    },
    {
      "heading": "Macroeconomic assessment and outlook",
      "content": "- Growth: Projected to increase in 2022, with strengthening economic recovery despite the worsening international economic environment and rising commodity prices.\n- Drivers of recovery:\n  - Strong vaccination campaign,\n  - Full lifting of COVID-related restrictions in July 2022,\n  - Large liquefied natural gas (LNG) investments driving the current account.\n- LNG developments: The first LNG project started production in November 2022.\n- Inflation:\n  - Has risen to double digits,\n  - Driven by global fuel and food prices and tropical storms that impacted domestic food supply in Q2 2022.\n- Fiscal developments in 2022: Broadly aligned with expectations, with strong revenue and contained spending."
    },
    {
      "heading": "Risks to the outlook",
      "content": "- Downside risks:\n  - Passthrough of fuel and food inflation to other prices,\n  - Social unrest,\n  - Terrorism activity in the north,\n  - Natural disasters,\n  - Governance weaknesses and debt vulnerabilities.\n- Upside risks:\n  - Strengthening recovery,\n  - Strong prospects for LNG demand,\n  - Scope for higher-than-expected non-LNG growth in the medium-term."
    },
    {
      "heading": "Policy assessment and recommendations (from IMF statement)",
      "content": "- Fiscal policy:\n  - Solid revenue performance and spending restraint aligned fiscal outcomes with program objectives.\n  - Authorities’ fiscal policy reforms will contribute to medium-term fiscal consolidation.\n  - A broader VAT base will help secure buoyant and diversified revenues independent of commodity prices.\n  - Reforming public sector remuneration will improve efficiency in delivering public services and create space for other spending priorities over time.\n  - Revenue administration and public financial management reforms are essential to achieve fiscal policy objectives.\n- Natural resource revenue management:\n  - The draft Sovereign Wealth Fund law is a welcome step to develop a transparent, accountable, and efficient framework for managing LNG receipts.\n  - Additional efforts needed to mitigate revenue volatility, strengthen public investment management, and integrate natural resource revenues into the broader fiscal framework.\n- Monetary policy and exchange rate:\n  - The monetary policy stance and proactive tightening since early 2021 are appropriate to manage inflation expectations.\n  - The Monetary Policy Consultation Clause (MPCC) upper inflation band was breached due to the rise in global fuel and food prices and the impact of domestic floods on food production.\n  - Continued caution is warranted to ensure adherence to program targets on reserves going forward.\n  - Additional exchange rate flexibility would help absorb external shocks.\n- Governance, anti-corruption, and AML/CFT:\n  - Progress continues across the governance and anti-corruption agenda.\n  - Authorities are implementing action plans to address shortfalls in the AML/CFT framework and Mozambique’s grey listing by the Financial Action Task Force.\n  - Near-term priorities: Amending the public probity law and continued implementation of recommendations from the audit of COVID spending.\n- Climate policy:\n  - The climate policy agenda is being articulated.\n  - Efforts should continue to integrate climate resilience criteria in public investment and project selection.\n- Capacity development and donor support:\n  - Continued capacity development and donor support remain imperative for Mozambique to achieve its development objectives."
    },
    {
      "heading": "Key statistics (Table 1. Mozambique: Selected Economic Indicators, 2019–23)",
      "content": "- National Income and Prices\n  - Nominal GDP (MT billion): 2019: 963; 2020: 983; 2021: 1,033; 2022: 1,142; 2023: 1,292\n  - Real GDP growth (percentage change): 2019: 2.3; 2020: -1.2; 2021: 3.8; 2022: 5.0\n  - Consumer price index (percentage change, end of period): 2019: 3.5; 2020: 6.7; 2021: 15.0; 2022: 8.5\n- Government Operations (percent of GDP)\n  - Total revenue: 2019: 29.0; 2020: 23.9; 2021: 25.7; 2022: 25.9\n  - Total expenditure and net lending: 2019: 29.8; 2020: 32.9; 2021: 31.5; 2022: 33.2; 2023: 33.3\n  - Overall balance, after grants: 2019: 0.3; 2020: -5.4; 2021: -4.8; 2022: -3.7; 2023: -3.9\n  - Primary Balance after grants: 2019: -2.3; 2020: -2.1; 2021: -0.2; 2022: -0.7\n  - Public sector debt: 2019: 99.0; 2020: 120.0; 2021: 107.0; 2022: 102.9; 2023: 101.4\n    - of which: external: 2019: 79.4; 2020: 97.8; 2021: 82.8; 2022: 77.6; 2023: 75.9\n- Money and Credit\n  - Reserve money (percentage change): 2019: 19.1; 2020: 9.0; 2021: -14.4; 2022: -5.1; 2023: 11.2\n  - M3 (Broad Money) (percentage change): 2019: 12.1; 2020: 23.6; 2021: 2.8; 2022: 11.8\n  - Credit to the economy (percentage change): 2019: 14.8; 2020: 3.0; 2021: 11.5\n  - Credit to the economy (percent of GDP): 2019: 24.0; 2020: 27.0; 2021: 26.5; 2022: 24.6; 2023: 24.3\n- External Sector (percentage change)\n  - Merchandise exports: 2019: -10.2; 2020: -23.1; 2021: 55.6; 2022: 38.9; 2023: -2.5\n  - Merchandise exports, excluding megaprojects: 2019: 8.3; 2020: -22.0; 2021: 42.7; 2022: 14.7; 2023: 8.6\n  - Merchandise imports: 2019: 9.5; 2020: -12.9; 2021: 70.1; 2022: -35.5\n  - Merchandise imports, excluding megaprojects: 2019: 9.3; 2020: -4.5; 2021: 37.8; 2022: 10.2; 2023: -0.6\n  - External current account, after grants (percent of GDP): 2019: -19.1; 2020: -27.3; 2021: -23.6; 2022: -41.5; 2023: -14.7\n  - Net international reserves (millions of U.S. dollars, end of period): 2019: 3,605; 2020: 3,493; 2021: 2,927; 2022: …\n  - Gross international reserves (millions of U.S. dollars, end of period): 2019: 3,884; 2020: 4,070; 2021: 3,470\n\nIMF Communications Department, Press Release No. 22/403, November 21, 2022.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Republic of Mozambique and the IMF\n- Special Drawing Rights (SDRs) -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- Press Release\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2022/11/21/pr22403-mozambique-imf-executive-board-concludes-first-review-under-ecf-arrangement"
    }
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    "Published: November 21, 2022",
    "The Executive Board completed the first review under the three-year Extended Credit Facility (ECF) arrangement for Mozambique.",
    "The Board completed the financing assurances review and approved the authorities’ request for modification of conditionality.",
    "Immediate disbursement: SDR 45.44 million (about US$59.26 million) usable for budget support.",
    "Total disbursements under the ECF arrangement after this review: SDR 113.6 million (about US$150million).",
    "The three-year ECF arrangement aims to:",
    "All end-June 2022 program performance criteria, indicative targets and the structural benchmark were met.",
    "Program implementation highlights:",
    "Growth: Projected to increase in 2022, with strengthening economic recovery despite the worsening international economic environment and rising commodity prices.",
    "Drivers of recovery:",
    "LNG developments: The first LNG project started production in November 2022.",
    "Inflation:",
    "Fiscal developments in 2022: Broadly aligned with expectations, with strong revenue and contained spending.",
    "Downside risks:",
    "Upside risks:",
    "Fiscal policy:",
    "Natural resource revenue management:",
    "Monetary policy and exchange rate:",
    "Governance, anti-corruption, and AML/CFT:",
    "Climate policy:",
    "Capacity development and donor support:",
    "National Income and Prices",
    "Government Operations (percent of GDP)",
    "Money and Credit",
    "External Sector (percentage change)",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[Republic of Mozambique and the IMF](http://www.imf.org/external/country/MOZ/index.htm)",
    "[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/)",
    "[Press Release](https://www.imf.org/en/News/Articles/2022/05/09/pr22145-mozambique-article-iv-consultation-and-ecf)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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