Maputo, 10 Jul (AIM) – The International Monetary Fund (IMF) has announced the disbursement of 60 million dollars to support the Mozambican State Budget, bringing total disbursements to Mozambique under the Extended Credit Facility (ECF) to 330.14 million dollars.
The ECF programme was approved in May 2022 after the Covid-19 pandemic and foresees total financing of 456 million dollars to Mozambique.
According to the IMF statement, the latest discussions between Mozambique and the IMF have focused on payroll “rationalization” for sustainable and cost-effective public service delivery, the role of state-owned companies (SOEs) and policies to improve their governance and transparency, and drivers of exchange rate stability from mid-2021.
“The executive board has concluded the regular consultation process with Mozambique relating to 2024 and the fourth evaluation of the ECF agreement at 36 months, which allows for an immediate disbursement equivalent to US$60 million usable for budget support”, reads the note.
The IMF claims that three of the four benchmarks under the programme were met by the end of June 2024, and two of the four quantitative performance criteria.
According to its Deputy Executive Director, Bo Li, cited in the document, the IMF estimates that the stock of Mozambican public debt will grow this year to the equivalent of 97.5 per cent of Gross Domestic Product (GDP) and there is a need to “strengthen” the country’s fiscal policy.
“Efforts to strengthen revenue administration, public financial management, debt management, and SOE operations are essential to put fiscal policy on a stronger footing”, he said.
The IMF estimates an economic growth of 4.3 per cent of GDP for Mozambique this year, against 5.4 per cent in 2023, while the stock of public debt is expected to grow to 97.5 per cent of GDP, against 93.9 per cent last year.
According to the document, the annual inflation rate is expected to decline this year to 3.6 per cent, compared with 4.3 per cent in 2023 and well below the peak of 10.9 per cent in 2022.
“A tight monetary policy stance has helped to contain inflationary pressures and rebuild foreign exchange reserves. With 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”, says the IMF document.
The note explains that a carefully calibrated fiscal and monetary policy mix is key to preserving macroeconomic stability, which means there is a need to improve monetary policy transmission by deepening the interbank, money, and foreign exchange markets, which remains important for improved macroeconomic management.
(AIM)
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