Press Release No. 07/268

Press Release: Press Statement at the Conclusion of an IMF Mission to Mozambique for the First Review under the Three-Year Policy Support Instrument

November 19, 2007

An International Monetary Fund (IMF) mission to Mozambique, led by Mr. Jean A. P. Clément, issued the following statement today in Maputo:

"An IMF staff team visited Maputo from October 29 to November 13, 2007 to review progress under Mozambique's three-year Policy Support Instrument (PSI) approved on June 18, 2007 (see Press Release No. 07/135) and to discuss the IMF's ongoing support for Mozambique's reform efforts. Mozambique's reform program is expected to be taken up by the IMF Executive Board in December 2007.

"In 2007, economic performance has remained strong with continued robust growth. Prospects for the remainder of the year are favorable. The fiscal position through end-September 2007 was better than programmed with tax collections buoyed by stronger-than-expected corporate and income taxes. Thanks to prudent fiscal and monetary policies, inflation is expected to decelerate in the single digit, albeit somewhat higher than programmed mainly on account of higher international oil prices. Despite a marked deceleration in traditional exports, net international reserves are expected to remain at a comfortable level on account of an increase in net capital inflows.

"Mozambique continues to implement its reform program successfully. All end-June and end-September 2007 quantitative and structural targets were met except for base money owing to an increase in money demand. Progress has been made in strengthening public expenditure management by rolling out the public administration information system (e-SISTAFE) to all remaining ministries at the central and provincial levels. Good initial progress has been made in reducing the cost of doing business. Tax administration has also improved, notably with an acceleration in the registration of tax payers and an increase in audits of large tax payers.

"In 2008, the Government of Mozambique will continue to consolidate macroeconomic stability through the pursuit of prudent monetary and fiscal policies in the context of a flexible exchange rate regime. The budget includes the hiring of 12,000 new teachers and 5,000 health workers, and the reinforcement of the security forces. The authorities have stated their intention to forcefully implement a second wave of reforms with focus on strengthening governance and further improving the cost of doing business to make Mozambique one of the most competitive countries in the Southern African Development Community (SADC) region. To ensure that the country generates the maximum benefit from natural resources and megaprojects, the authorities plan to implement the new mining and petroleum fiscal regime and ensure that concessions are extended in a transparent manner. The ambitious reform agenda aiming at sustaining growth and reduce poverty will need the continued support of the international community. The strategy to achieve these goals is set out in the Plano de Acção Para a Redução da Pobreza Absoluta II (PARPA II)."