Maputo, 6 Nov (AIM) – The International Monetary Fund (IMF) has claimed that Mozambique’s economic growth “remains resilient” and believes that growth this year will reach six per cent.
In a statement issued at the end last week of the visit by an IMF team, the team’s leader, Pablo Lopez Murphy, said it had held “constructive and fruitful discussions” with the Mozambican authorities “on the economic and financial policies” needed to support completion of the Third Review under the Extended Credit Facility (ECF) arrangement.
He regarded the outlook for the extractive sector as “strong” since large liquefied natural gas (LNG) projects “are expected to resume activities, following sustained improvements in security conditions”.
However, “growth in the non-extractive sector continued slowing, with manufacturing and construction contracting for the fourth consecutive quarter since June 2022”.
The statement claimed that after “fiscal slippages” in 2022, “the authorities have implemented a strong correction to help put fiscal policy back on track”.
“The domestic primary balance is projected at 0.8 percent of GDP this year, compared to a primary deficit of 2.8 percent of GDP in 2022”, it continued.
Annual inflation, said Lopez Murphy, had peaked at 12.1 per cent in August 2022, but had declined to 3.9 per cent in September 2023, “mainly reflecting lower food and fuel prices, but also a deceleration in other domestic prices”.
The IMF clearly believes it is time for the Bank of Mozambique to cut its interest rates. “The decline in inflation combined with broadly unchanged nominal interest rates means that both the policy and market interest rates have risen to high levels in real terms, generating very tight financial conditions”, said Lopez Murphy. “With inflation expectations well anchored, fiscal consolidation continuing, and weak non-extractive growth, a gradual easing of monetary policy could be considered”.
(AIM)
Pf/ (304)
