Thursday, July 18, 2024

IMF approves third review of financing program for Mozambique and guarantees “immediate” disbursement of 60.7 million dollars

The International Monetary Fund (IMF) approved the third revision of the financing program for Mozambique, guaranteeing an “immediate disbursement” of 60.7 million dollars for budget support. With this new sum, total disbursements to the country will rise to 273 million dollars, the institution announced in a statement published by Lusa.

According to the IMF, the program’s performance has been satisfactory, with five of the eight structural benchmarks met by the end of December 2023, and three of the four quantitative performance criteria observed.

“Economic recovery is accelerating, supported by liquefied natural gas (LNG) projects in a context of modest non-mining growth. At the same time, inflationary pressures have declined markedly. Although the outlook remains positive, significant risks remain, mainly due to adverse weather events and the fragile security situation,” warned the IMF’s deputy managing director, Bo Li, quoted in the same statement.

The source recalled that this technical assistance program “aims to support Mozambique’s economic recovery and reduce public debt and financing vulnerabilities, while promoting higher and more inclusive growth through structural reforms”.

The deputy executive director also acknowledged that the Mozambican authorities “are taking steps to ensure fiscal discipline in the short and medium term, but that, given the country’s high debt and tight financing conditions, continued fiscal consolidation efforts are necessary.”

“On the revenue side, the broadening of the VAT base will help to mobilize revenue efficiently. On the expenditure side, continuing to reform the wage bill will help create fiscal space for high-priority spending, including social spending,” said Bo Li.

He argued that the “monetary policy stance has helped contain inflationary pressures and rebuild foreign exchange reserves and that, with inflation expectations well anchored, a gradual easing of restrictive policy is justified”.

“Implementing an appropriate and carefully calibrated fiscal and monetary policy mix is key to preserving macroeconomic stability. Improving the transmission of the key rate by deepening the interbank, money and foreign exchange markets over the medium term remains important for better macroeconomic management and allowing greater exchange rate flexibility to cope with external shocks,” he concluded.

This program was approved in May 2022 and provides total funding of 456 million dollars to Mozambique.

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