IMF Staff Concludes Visit to Mozambique

IMF News, November 21, 2018

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IMF staff team led by Ricardo Velloso visited Maputo during November 6–19, 2018 to review recent economic developments and initiate discussions on possible options for engagement in 2019.
End-of-Mission press releases convey preliminary findings of IMF staff; this mission will not result in a Board discussion.

Real GDP growth reached 3.3 percent in the first three quarters of 2018.
Inflation declined to 4.7 percent year-on-year in October 2018.
Bank of Mozambique rebuilt international reserves to 6.3 months of next years’ projected non-megaprojects imports.
The exchange rate has been stable.
Contributions to growth came from a broad range of economic sectors, including agriculture.
Adjustments in administered prices were significant but inflation remained subdued due to tight monetary conditions and lower food price increases.

Real GDP growth for 2019 is projected in the range of 4 percent to 4.7 percent.
Inflation is projected at around 6 percent in 2019.
Projected drivers of the 2019 recovery include:
- sustained efforts to achieve durable peace,
- gradual easing of monetary conditions,
- clearing of domestic payments arrears to suppliers,
- higher foreign direct investment, particularly in the liquefied natural gas (LNG) megaprojects.

The mission advised maintaining fiscal prudence in the run-up to next year’s elections by keeping the primary fiscal deficit at, or below, 1.5 percent of GDP in 2019 (the same level projected for 2018).
The mission stressed reliance on external grant financing and highly concessional loans.
Issuance of debt guarantees should strictly follow the approval procedures established in December 2017.
The mission welcomed ongoing efforts to clear domestic payments arrears to suppliers and adopt public financial management reforms to avoid further accumulation of arrears.
Eliminating over time the VAT refund backlog is identified as critical.

There is room for the Bank of Mozambique to continue easing monetary policy, but this should be done cautiously given global uncertainties.
The mission encouraged the Bank of Mozambique to safeguard international reserves and maintain the flexible exchange rate regime.

The mission welcomed the authorities’ plans to prepare, with IMF technical assistance, a comprehensive diagnostic of governance and corruption challenges.
The mission welcomed efforts by the Attorney-General’s Office, in cooperation with development partners, to bring accountability to the issue of the previously undisclosed debts, and encouraged continued efforts by all parties involved.
The mission stressed that possible future agreements with holders of previously undisclosed debts should be consistent with returning the country’s overall debt position to a sustainable path and achieving poverty reduction and sustainable development.

The mission welcomed progress with implementation of investment and financing plans for LNG megaprojects in Cabo Delgado.
It stressed that future fiscal revenue from such projects, if protected and put to good use, could transform lives and play a significant role in sustainable development and poverty reduction.

The mission held discussions with Prime Minister Carlos do Rosário, Minister of Economy and Finance Adriano Maleiane, Minister of Mineral Resources and Energy Ernesto Max Tonela, Minister of Industry and Commerce Ragendra de Sousa, Bank of Mozambique Governor Rogério Zandamela, other senior officials, representatives from the Assembly of the Republic, private sector, and the donor community.

Source: IMF Press Release No. 18/438, November 21, 2018.