Press Release No. 09/328

Press Release: Statement at the Conclusion of an IMF Staff Mission to Mozambique

September 25, 2009

An International Monetary Fund (IMF) mission visited Mozambique September 8 – 23, 2009 to conduct the fifth review under the Policy Support Instrument (PSI) and the first review under the Exogenous Shock Facility (ESF). The mission met with Minister of Finance, Hon. Manuel Chang; the Minister of Plan and Development, Hon. Aiuba Cuereneia, the Minister of Mineral Resources, Hon Esperança Bias, the Minister of Trade and Industry, Hon. António Fernando and the Governor of the Central Bank of Mozambique, Hon. Ernesto Gouveia Gove, and other senior government officials. The mission also held meetings with private sector representatives and members of civil society.

Mr. Johannes Mueller, Mission Chief for Mozambique, issued the following statement in Maputo at the conclusion of the mission on september 23:

“The Mozambican economy has shown some resiliency to the global economic crisis. Economic growth is expected to temporarily soften to 4½ percent in 2009 but recover to 5½ percent in 2010 and 6 percent over the medium-term. The recovery in external demand should help stabilize the external current account deficit (after grants) at around 10 percent of GDP over 2010-12. This should help buttress international reserves, which are also benefiting from the IMF’s ESF and the recent allocation of Special Drawing Rights (SDR). Inflation has fallen in 2009 and is expected to remain below 6 percent over the medium term.

“Mozambique’s strong economic fundamentals and prudent macroeconomic policy mix over the past decade have provided the necessary flexibility to respond to the global economic crisis. The mission supports the temporary easing of fiscal policy, by maintaining spending levels as tax collections fall short of budgetary targets. The mission also agreed that easing monetary policy has provided room for a strong expansion of private sector credit, allowing domestic companies to replace scarce foreign financing by increased recourse to the domestic banking system.

“Looking ahead, it will be appropriate to initiate a gradual unwinding of the accommodating policy stance in 2010 in tandem with the expected strengthening in economic activity. In light of the global crisis and the strong private credit growth, it will be important to monitor closely commercial banks’ liquidity and credit quality. Maintaining Mozambique’s strong economic growth over the medium term will benefit from continued decisive implementation of structural reforms to strengthen public finance management, tax administration, financial sector stability and development, and the business environment.

“The IMF's Executive Board is scheduled to discuss the PSI/ESF program review in November/December 2009.”