Maputo, July 9, 2024 (Lusa) - The International Monetary Fund estimates that Mozambique's stock of public debt will grow this year to the equivalent of 97.5% of gross domestic product, and advocates measures to "strengthen" the country's fiscal policy, in a statement released on Tuesday.
"Efforts to strengthen revenue administration, public finance management, debt management and the operations of public companies are essential to strengthening fiscal policy," said the IMF's deputy managing director, Bo Li, quoted in the statement in which the institution announced that it will immediately disburse another $60 million (€55.5 million) in support under its existing assistance programme for the country.
In the statement, the IMF said that the executive board had concluded the regular consultation process with Mozambique for 2024 and the fourth review of the 36-month Extended Credit Facility (ECF) agreement, which "allows for an immediate disbursement" equivalent to $60.03 million "usable for budget support" - bringing the total disbursements to Mozambique under this assistance programme to $330.14 million (€304.9 million).
In the document, the IMF estimates economic growth for Mozambique of 4.3% this year, compared to 5.4% in 2023, while the public debt stock is expected to grow to 97.5% of GDP, compared to 93.9% last year.
Inflation in Mozambique is expected to fall this year to 3.6%, down from 4.3% in 2023 and far from the peak of 10.9% in 2022.
"A tight monetary policy stance has helped contain inflationary pressures and rebuild foreign exchange reserves," said Bo Li, quoted in the statement. "Given the weak outlook for non-mining growth, well-anchored inflation expectations and continued fiscal consolidation, a gradual easing of the monetary policy stance is appropriate."
The IMF's deputy executive director argues that "a carefully calibrated combination of fiscal and monetary policies is key to preserving macroeconomic stability" in Mozambique.
"Improving the transmission of monetary policy by deepening the interbank, money and foreign exchange markets remains important for better macroeconomic management. Greater exchange rate flexibility is needed to increase resilience to external shocks," Bo Li added, stressing that "more progress is also needed" in Mozambique in the fight against money laundering and terrorist financing.
At the same time, the IMF's deputy managing director recognised that "progress has continued across the fiscal structural and governance agenda" in Mozambique, including "the publication of a decree-law requiring the collection of information on beneficial owners" of companies, the "publication of financial risk indicators" of public companies and monthly cash flow forecasts from the Treasury "to report on budget execution."
The ECF programme for Mozambique was approved in May 2022 and provides total financing of $456 million (€421.3 million).
In April, the IMF's managing director, Kristalina Georgieva, publicly acknowledged the good performance of Mozambique's economy, after receiving its president, Filipe Nyusi, in Washington.
"We have an active programme with Mozambique and I'm pleased to see that the country's fiscal situation has strengthened, growth is up and inflation is down, reserves are strong," she said at the time.
Flanked by Nyusi, whom she met for more than half an hour at the financial institution's headquarters in the US capital, Georgieva added that the result of this performance has been the building of strong institutions, putting good policies into practice.
PVJ/ARO // ARO.
Lusa
