Press Release No. 09/450

Press Release: IMF Completes the Fifth Review Under the Policy Support Instrument and the First Review Under the Exogenous Shocks Facility for Mozambique

December 8, 2009

The Executive Board of the International Monetary Fund (IMF) has completed the fifth review under the three-year Policy Support Instrument (PSI) and the first review under the one-year Exogenous Shocks Facility (ESF). The completion of the first review under the ESF makes available a disbursement of SDR 14.2 million (about 22.6 US million dollars). The Board's decision was taken on a lapse of time basis.¹

After a prolonged period of robust macroeconomic performance, Mozambique has been adversely affected by the global economic crisis. Nonetheless, the economy has shown unexpected resilience, partly because of the authorities’ prompt response to temporarily ease macroeconomic policies. Growth, which averaged 7½ percent over the past three years, is expected to weaken to 4½ percent in 2009. Policy implementation has remained strong and broadly in line with the program. Most of the key quantitative targets for end-June 2009 were met —though net credit to the government and reserve money growth were higher than envisaged—and there has been good progress in implementing structural reforms.

Economic performance is expected to improve in 2010 in tandem with the global economic recovery, with a projected growth rate of 5½ percent. The stronger economic activity should allow the authorities to start unwinding the temporary fiscal and monetary policy stimulus. The authorities reiterated their commitment to their medium-term strategy of prudent macroeconomic policies and structural reforms to support private sector development.

The PSI for Mozambique was approved on June 18, 2007 (See Press Release No. 07/135) to support the country’s economic reform efforts. It is aimed at consolidating macroeconomic stability and at achieving sustained economic growth and poverty reduction. The strategy to achieve this goal remains set in the Mozambican authorities' national poverty reduction strategy, Plano de Acção para Redução da Pobreza Absoluta (PARPA II).

The ESF in the amount of SDR 113.6 million was approved on May 29, 2009 (see Press Release No. 09/247 ), and SDR 85.2 million was disbursed on approval. The ESF is designed to provide policy support and financial assistance on concessional terms to eligible low-income countries facing temporary exogenous shocks. The IMF financing for Mozambique was approved to help offset the deterioration of its balance of payments.

¹ The Executive Board takes decisions under its lapse of time procedure when it is agreed by the Board that a proposal can be considered without convening formal discussions.