## IMF Executive Board Concludes the First Review under the Extended Credit Facility Arrangement for the Republic of Mozambique

_IMF News, November 21, 2022_

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**Canonical URL:** [IMF Executive Board Concludes the First Review under the Extended Credit Facility Arrangement for the Republic of Mozambique](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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## Bibliographic details
- Published: November 21, 2022

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### Review outcome and financing
- 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).

### Objectives of the ECF arrangement
- The three-year ECF arrangement aims to:
  - Support the economic recovery,
  - Reduce public debt and financing vulnerabilities,
  - Foster higher and more inclusive growth through structural reforms.

### Program performance and implementation
- All end-June 2022 program performance criteria, indicative targets and the structural benchmark were met.
- Program implementation highlights:
  - Completion of important program commitments in fiscal governance and anti-corruption.
  - Strong program performance despite a challenging environment.

### Macroeconomic assessment and outlook
- Growth: Projected to increase in 2022, with strengthening economic recovery despite the worsening international economic environment and rising commodity prices.
- Drivers of recovery:
  - Strong vaccination campaign,
  - Full lifting of COVID-related restrictions in July 2022,
  - Large liquefied natural gas (LNG) investments driving the current account.
- LNG developments: The first LNG project started production in November 2022.
- Inflation:
  - Has risen to double digits,
  - Driven by global fuel and food prices and tropical storms that impacted domestic food supply in Q2 2022.
- Fiscal developments in 2022: Broadly aligned with expectations, with strong revenue and contained spending.

### Risks to the outlook
- Downside risks:
  - Passthrough of fuel and food inflation to other prices,
  - Social unrest,
  - Terrorism activity in the north,
  - Natural disasters,
  - Governance weaknesses and debt vulnerabilities.
- Upside risks:
  - Strengthening recovery,
  - Strong prospects for LNG demand,
  - Scope for higher-than-expected non-LNG growth in the medium-term.

### Policy assessment and recommendations (from IMF statement)
- Fiscal policy:
  - Solid revenue performance and spending restraint aligned fiscal outcomes with program objectives.
  - Authorities’ fiscal policy reforms will contribute to medium-term fiscal consolidation.
  - A broader VAT base will help secure buoyant and diversified revenues independent of commodity prices.
  - Reforming public sector remuneration will improve efficiency in delivering public services and create space for other spending priorities over time.
  - Revenue administration and public financial management reforms are essential to achieve fiscal policy objectives.
- Natural resource revenue management:
  - The draft Sovereign Wealth Fund law is a welcome step to develop a transparent, accountable, and efficient framework for managing LNG receipts.
  - Additional efforts needed to mitigate revenue volatility, strengthen public investment management, and integrate natural resource revenues into the broader fiscal framework.
- Monetary policy and exchange rate:
  - The monetary policy stance and proactive tightening since early 2021 are appropriate to manage inflation expectations.
  - 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.
  - Continued caution is warranted to ensure adherence to program targets on reserves going forward.
  - Additional exchange rate flexibility would help absorb external shocks.
- Governance, anti-corruption, and AML/CFT:
  - Progress continues across the governance and anti-corruption agenda.
  - Authorities are implementing action plans to address shortfalls in the AML/CFT framework and Mozambique’s grey listing by the Financial Action Task Force.
  - Near-term priorities: Amending the public probity law and continued implementation of recommendations from the audit of COVID spending.
- Climate policy:
  - The climate policy agenda is being articulated.
  - Efforts should continue to integrate climate resilience criteria in public investment and project selection.
- Capacity development and donor support:
  - Continued capacity development and donor support remain imperative for Mozambique to achieve its development objectives.

### Key statistics (Table 1. Mozambique: Selected Economic Indicators, 2019–23)
- National Income and Prices
  - Nominal GDP (MT billion): 2019: 963; 2020: 983; 2021: 1,033; 2022: 1,142; 2023: 1,292
  - Real GDP growth (percentage change): 2019: 2.3; 2020: -1.2; 2021: 3.8; 2022: 5.0
  - Consumer price index (percentage change, end of period): 2019: 3.5; 2020: 6.7; 2021: 15.0; 2022: 8.5
- Government Operations (percent of GDP)
  - Total revenue: 2019: 29.0; 2020: 23.9; 2021: 25.7; 2022: 25.9
  - Total expenditure and net lending: 2019: 29.8; 2020: 32.9; 2021: 31.5; 2022: 33.2; 2023: 33.3
  - Overall balance, after grants: 2019: 0.3; 2020: -5.4; 2021: -4.8; 2022: -3.7; 2023: -3.9
  - Primary Balance after grants: 2019: -2.3; 2020: -2.1; 2021: -0.2; 2022: -0.7
  - Public sector debt: 2019: 99.0; 2020: 120.0; 2021: 107.0; 2022: 102.9; 2023: 101.4
    - of which: external: 2019: 79.4; 2020: 97.8; 2021: 82.8; 2022: 77.6; 2023: 75.9
- Money and Credit
  - Reserve money (percentage change): 2019: 19.1; 2020: 9.0; 2021: -14.4; 2022: -5.1; 2023: 11.2
  - M3 (Broad Money) (percentage change): 2019: 12.1; 2020: 23.6; 2021: 2.8; 2022: 11.8
  - Credit to the economy (percentage change): 2019: 14.8; 2020: 3.0; 2021: 11.5
  - Credit to the economy (percent of GDP): 2019: 24.0; 2020: 27.0; 2021: 26.5; 2022: 24.6; 2023: 24.3
- External Sector (percentage change)
  - Merchandise exports: 2019: -10.2; 2020: -23.1; 2021: 55.6; 2022: 38.9; 2023: -2.5
  - Merchandise exports, excluding megaprojects: 2019: 8.3; 2020: -22.0; 2021: 42.7; 2022: 14.7; 2023: 8.6
  - Merchandise imports: 2019: 9.5; 2020: -12.9; 2021: 70.1; 2022: -35.5
  - Merchandise imports, excluding megaprojects: 2019: 9.3; 2020: -4.5; 2021: 37.8; 2022: 10.2; 2023: -0.6
  - External current account, after grants (percent of GDP): 2019: -19.1; 2020: -27.3; 2021: -23.6; 2022: -41.5; 2023: -14.7
  - Net international reserves (millions of U.S. dollars, end of period): 2019: 3,605; 2020: 3,493; 2021: 2,927; 2022: …
  - Gross international reserves (millions of U.S. dollars, end of period): 2019: 3,884; 2020: 4,070; 2021: 3,470

*IMF Communications Department, Press Release No. 22/403, November 21, 2022.*

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## References

- [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)

_Source: https://www.imf.org/en/news/articles/2022/11/21/pr22403-mozambique-imf-executive-board-concludes-first-review-under-ecf-arrangement_