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Mozambique has received approval to access a $60.6 million loan after the International Monetary Fund (IMF) Executive Board completed the Second Review under the three-year extended credit facility (ECF) arrangement for the country, as stated in a press release by the multilateral lender.
According to the IMF, the completion of the second review enables the immediate disbursement of SDR 45.44 million (equivalent to approximately US$60.6 million), which can be utilized for budget support. This brings Mozambique’s total disbursements under the ECF arrangement to SDR 159.04 million (about US$212.09 million).
The IMF projects an increase in growth for 2023, driven by the expansion of liquefied natural gas (LNG) production, agriculture, and services activities. Inflation has returned to single digits due to proactive monetary policies and favorable import prices for fuel and food. However, fiscal performance in 2022 fell short of expectations, primarily due to wage bill reform delays and revenue underperformance.
While LNG investments contribute to the current account deficit, the expected rise in LNG exports and a decrease in food and energy imports are projected to improve the current account balance in the future.
Overall, the program’s performance has been largely favorable, although there have been notable setbacks in the fiscal area. Nevertheless, important commitments related to fiscal governance and anti-corruption have been fulfilled.
The IMF identified downside risks to the outlook, including potential delays to LNG projects, increasing geo-economic fragmentation, inflationary pressures from higher wages, natural disasters, and food insecurity. Upside risks include the scaling up of LNG projects.
Mr. Bo Li, IMF Deputy Managing Director and Acting Chair, commented, “Economic recovery in Mozambique is gaining strength, supported by LNG projects and a rebound in various sectors. The economy has shown resilience in the face of Cyclone Freddy, which struck Mozambique in early 2023. While the outlook remains positive, significant risks persist due to adverse climate events and a fragile security situation.”
Li emphasized the need for corrective measures to ensure fiscal discipline in 2023, with continued efforts toward fiscal consolidation in the medium term. Broadening the value-added tax (VAT) base would help generate revenues efficiently, while reducing the wage bill in line with regional peers would create fiscal space for priority spending. Strengthening the social safety net is also important to address food insecurity and poverty.
Regarding monetary policy, Li stated that the current stance is appropriate for containing inflationary pressures and rebuilding reserves. Continued caution is necessary to anchor inflation and support macroeconomic stability. The implementation of an inflation targeting regime over the medium term, as well as improved governance, anti-corruption measures, fiscal structural reforms, and enhanced climate resilience policies, are key priorities.
Li emphasized the importance of continued program ownership by the authorities, complemented by capacity development efforts and donor support, to achieve Mozambique’s development objectives.
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