Maputo, July 9, 2024 (Lusa) - The International Monetary Fund (IMF) estimates that Mozambique's public debt stock will grow this year to the equivalent of 97.5% of GDP and advocates measures to "strengthen" the country's fiscal policy.
"Efforts to strengthen revenue administration, public finance management, debt management and the operations of state-owned enterprises are essential to strengthening fiscal policy," says the IMF's deputy managing director, Bo Li, quoted in the statement in which the institution announced today that it will immediately disburse another $60 million (€55.5 million) in support to Mozambique under the assistance programme.
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 ECF (Extended Credit Facility) 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% of Gross Domestic Product (GDP) 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 away from the peak of 10.9% in 2022.
"A restrictive monetary policy stance has helped contain inflationary pressures and rebuild foreign exchange reserves. 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," said Bo Li, quoted in the statement.
The IMF's deputy executive director said 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. It is necessary to allow for greater exchange rate flexibility in order to increase resilience to external shocks," adds Bo Li, recognising that "more progress is also needed" in Mozambique in terms of combating money laundering and terrorist financing.
On the other hand, the IMF's deputy executive director recognises that "progress has continued on the entire structural fiscal and governance agenda" in Mozambique, including "the publication of a decree-law requiring the collection of information on the 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 was approved in May 2022 and provides total funding of $456 million (€421.3 million) to Mozambique.
In April, IMF Managing Director Kristalina Georgieva recognised the good performance of the Mozambican economy, after receiving Mozambican 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.
Alongside the Mozambican President, with whom she met for more than 30 minutes at the financial institution's headquarters in the US capital, Kristalina Georgieva added that the result of this performance has been the building of strong institutions, putting good policies into practice.
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