Press Release No. 23/371

IMF Staff Concludes Visit to Mozambique

November 1, 2023

• IMF staff and the Mozambican authorities have discussed performance and policies underpinning the third review of the program under the ECF arrangement. Discussions were fruitful and will continue in the coming weeks aiming to reach Staff Level Agreement.

Maputo: An International Monetary Fund (IMF) team, led by Mr. Pablo Lopez Murphy, conducted discussions with the Mozambican authorities during October 18 to October 31, 2023, on the Third Review under the Extended Credit Facility (ECF) arrangement.

At the end of the IMF team’s visit to Maputo, Mr. Lopez Murphy issued the following statement:

“The IMF team has held constructive and fruitful discussions with the Mozambican authorities on the economic and financial policies needed to support the completion of the Third Review of the program under the ECF arrangement. 

“Mozambique’s economic growth overall remains resilient and is projected at 6 percent in 2023. While LNG production at the Coral South project has ramped up, growth in the non-extractive sector continued slowing, with manufacturing and construction contracting for the fourth consecutive quarter since June 2022. The outlook for the extractive sector is strong as large LNG projects are expected to resume activities, following sustained improvements in security conditions in the north.

“After the 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. Fiscal consolidation is set to continue in 2024, in line with the budget proposal sent to Parliament. Maintaining fiscal discipline in 2024 remains critical amid tight domestic and external financing conditions.

“After peaking at 12.1 percent (yoy) in August 2022, headline inflation declined rapidly to 3.9 percent (yoy) in September 2023, with core inflation at 4.1 percent, mainly reflecting lower food and fuel prices, but also a deceleration in other domestic prices.

“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. With inflation expectations well anchored, fiscal consolidation continuing, and weak non-extractive growth, a gradual easing of monetary policy could be considered.

“The government has made progress on structural reforms set out under the program. A Ministerial Diploma for the taxation of the production of minerals was adopted and a new e-tax system is in place to collect all taxes. Fund staff encourages to advance reforms to strengthen governance and reduce corruption vulnerabilities.

“The IMF staff team met with Prime Minister Adriano Maleiane, Minister of Economy and Finance Max Tonela, Governor of the Bank of Mozambique Rogerio Zandamela, and other senior officials. The mission also met with representatives of civil society, political parties, development partners, and the private sector.

“The team wishes to thank the Mozambican authorities for their excellent cooperation and for the frank and constructive dialogue and plans during the mission. The team will continue its discussions in the context of the third review virtually and through the Resident Representative Office in Maputo.”