IMF Executive Board Concludes 2013 Article IV Consultation with Mozambique

Public Information Notice (PIN) No. 13/75
July 3, 2013

Public Information Notices (PINs) form part of the IMF's efforts to promote transparency of the IMF's views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINs are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post-program monitoring, and of ex post assessments of member countries with longer-term program engagements. PINs are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case.

On June 24, 2013, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Mozambique.1


Mozambique has sustained strong economic growth over nearly two decades, helped by foreign investment, mainly in mega-projects in the natural resource sector, and generous support by development partners. However, while poverty has been reduced, more than half of the population still lives below the national poverty line. Improvements have been most pronounced in the more affluent Southern regions and in urban centers, especially the Maputo area. This underlines the need for building a more inclusive growth through economic diversification, employment creation, and the expansion of social protection.

Mozambique’s economy remains robust, despite a still-fragile world economic environment resulting from the financial crisis. Reflecting the rapid expansion in coal production as well as in financial services, transport and communications, and agriculture, Mozambique’s real gross domestic product (GDP) growth is estimated to have reached 7½ percent in 2012. Severe floods in early 2013 have had a significant impact, destroying crops in the South and severely damaging infrastructure. But real GDP is still projected to grow by around 7 percent this year as mining expands further and overall agricultural production is set to recover speedily. Consumer price inflation slowed sharply to 2.2 percent in December 2012, one of the lowest in the region. In early 2013, floods pushed up food prices, though inflation is projected to remain low at around 5-6 percent over the medium term. External transactions are increasingly dominated by large private investments in the mining and hydrocarbon sectors, financed mostly by foreign direct investment and some private borrowing abroad. Fiscal performance has been largely in line with the program. External borrowing has risen in 2012 as the authorities have stepped up borrowing on commercial terms to fund investments; overall debt levels remain low.

Executive Board Assessment

Directors commended the authorities for their policies, which have translated into a strong macroeconomic performance in recent years. While the medium-term growth outlook is favorable, it will be important to manage risks stemming from the external and internal environments. Directors called for continued commitment to sound policies and structural reforms to preserve macroeconomic stability, foster inclusive growth, and reduce poverty.

Recognizing the need to support public investment and social development, Directors emphasized the importance of fiscal prudence as revenues from extractive industries will remain modest in the near term. To limit fiscal risks, they advised prioritization of current spending, in particular containing the wage bill. They also called for steps to modernize revenue administration, strengthen public financial management, and ensure timely settlement of VAT refunds. Directors also saw merit in developing a fiscal policy framework that incorporates the anticipated natural resource receipts over the medium term.

Directors acknowledged that the current high level of public investment can make an important contribution to improving infrastructure and enabling Mozambique to access its natural resource wealth. However, they recommended careful monitoring of the pace and effectiveness of these investments in order to maximize returns, avoid hitting absorptive capacity constraints, and preserve debt sustainability. In this context, Directors encouraged the authorities to continue to strengthen their medium-term debt strategy as well as project selection and monitoring.

Directors endorsed the authorities’ monetary policy stance but underscored the need to remain vigilant and tighten policy if inflationary pressures emerge. They welcomed steps underway to improve monetary operations and strengthen the transmission mechanisms.

Directors agreed that the banking system has shown resilience during the global financial crisis. In light of the ongoing expansion of the financial sector, they endorsed the authorities’ efforts to develop stress-testing capacity and strengthen prudential regulations. Directors welcomed progress in establishing a banking crisis resolution framework and adopting risk-based surveillance. Implementation of the new Anti-Money Laundering/Combating the Financing of Terrorism (AM/CFT) law should support further anti-corruption efforts. They looked forward to the vigorous implementation of the new Financial Sector Development Strategy.

Directors encouraged the authorities to continue to implement their Poverty Reduction Strategy. A renewed focus on job creation, improvements in agricultural productivity, and economic diversification hold the key to more inclusive growth in the period ahead.

Mozambique: Selected Economic and Financial Indicators, 2011-14


  2011   2012   2013   2014



Act.   Est.   Proj.   Proj.
  (Annual percentage change, unless otherwise indicated)

National income and prices


Nominal GDP (MT billion)

  365   404   454   520

Nominal GDP growth

  16.0   10.6   12.3   14.6

Real GDP growth

  7.3   7.4   7.0   8.5

GDP per capita (US$)

  571   634   640   684

Consumer price index (annual average)

  10.4   2.1   5.5   5.6

Consumer price index (end of period)

  5.5   2.2   6.1   5.4

Exchange rate, MT per US dollar, eop

  27.1   29.7   ...   ...

Exchange rate, MT per US dollar, per.avg.

  29.1   28.4   ...   ...

External sector


Merchandise exports

  33.6   11.3   13.8   20.9

Merchandise exports, excluding megaprojects

  65.8   15.6   4.0   26.2

Merchandise imports

  52.8   14.9   15.3   11.3

Merchandise imports, excluding megaprojects

  46.2   4.9   15.2   8.4

Terms of trade

  2.5   -10.0   -1.9   -0.1

Nominal effective exchange rate (annual average)

  12.4   7.4   ...   ...

Real effective exchange rate (annual average)

  19.7   5.4   ...   ...

Money and credit


Reserve money

  8.5   19.7   17.9   15.0

M3 (Broad money)

  9.4   29.4   19.0   15.5

Credit to the economy

  6.4   18.3   21.5   19.1

(Percent of GDP)

  26.9   28.8   31.1   32.3
    (Percent of GDP)

Investment and saving


Gross domestic investment

  36.7   48.3   49.4   51.8


  14.9   13.6   16.2   17.2

Other sectors

  21.9   34.7   33.2   34.6

Gross domestic savings (excluding grants)

  5.5   8.0   6.0   7.0


  2.0   4.1   3.8   3.6

Other sectors

  3.6   3.9   2.2   3.4

External current account, before grants

  -31.2   -40.3   -43.4   -44.8

External current account, after grants

  -24.3   -36.5   -39.9   -41.3

Government budget


Total revenue 1

  20.7   23.5   24.5   23.5

Total expenditure and net lending

  33.6   32.9   36.3   35.5

Overall balance, before grants

  -13.1   -9.6   -11.8   -12.0

Total grants

  7.8   5.4   5.1   4.8

Overall balance, after grants

  -5.3   -4.2   -6.7   -7.2

Domestic primary balance, before grants

  -2.9   -1.0   -2.7   -1.7

External financing (incl. debt relief)

  3.7   4.2   5.7   6.4

Net domestic financing

  1.6   0.7   1.0   0.8


  0.0   0.0   0.0   0.0

Total public debt 2

  39.3   42.2   47.8   50.9

Of which: external

  32.6   36.3   41.6   44.7

Of which: domestic

  6.7   5.9   6.2   6.2

(Millions of U.S. dollars, unless otherwise indicated)

External current account, before grants

  -3,922   -5,737   -6,373   -7,158

External current account, after grants

  -3,059   -5,198   -5,854   -6608

Overall balance of payments

  323   373   100   320

Net international reserves (end of period) 3

  2,239   2,605   2,704   3,023

Gross international reserves (end of period) 3

  2,428   2,799   2,894   3,211

Months of projected imports of goods and nonfactor services

  2.9   3.0   2.8   2.6
  • Months of imports of goods and nonfactor services, excl. megaprojects

  5.2   6.2   4.2   4.2

Sources: Mozambican authorities; and IMF staff estimates and projections.


1 Net of verified VAT refund requests.


2 Consistent with DSA definition, the nonconcessional Portuguese credit line is included under the external debt.

3 Includes disbursements of IMF resources under the ESF and August 2009 SDR allocation.

1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here:


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