IMF Calls for Stronger Fiscal Policy in Mozambique amid Growing Debt
The International Monetary Fund (IMF) has raised concerns about Mozambique’s growing public debt, estimating it will reach 97.5% of the country’s gross domestic product this year. In a statement released on Tuesday, the IMF emphasized the need for measures to strengthen Mozambique’s fiscal policy.
IMF’s deputy managing director, Bo Li, highlighted the importance of efforts to enhance revenue administration, public financial management, debt management, and state-owned enterprise operations. The IMF announced an immediate disbursement of $60 million in support under its existing assistance program for Mozambique.
The IMF’s executive board concluded the regular consultation process with Mozambique for 2024 and the fourth review of the Extended Credit Facility (ECF) agreement. This allows for an immediate disbursement of $60.03 million for budget support, bringing the total disbursements to Mozambique under this program to $330.14 million.
Despite the economic growth forecast of 4.3% for Mozambique this year, down from 5.4% in 2023, the country’s public debt stock is expected to increase to 97.5% of GDP. Inflation is projected to decrease to 3.6% this year, compared to 4.3% in 2023.
Bo Li emphasized the importance of a carefully calibrated fiscal and monetary policy mix to maintain macroeconomic stability in Mozambique. The IMF also highlighted the need for progress in improving monetary policy transmission and enhancing resilience to external shocks.
The IMF acknowledged the progress made in Mozambique’s fiscal structural and governance agenda, including measures such as collecting beneficial ownership information from companies and publishing financial risk indicators of state-owned enterprises.
The ECF program for Mozambique, approved in May 2022, provides total financing of $456 million. IMF’s managing director, Kristalina Georgieva, praised Mozambique’s economic performance during a meeting with President Filipe Nyusi in Washington, noting the strengthening fiscal situation, increased growth, lower inflation, and strong reserves.
Overall, the IMF’s recommendations and support aim to help Mozambique address its fiscal challenges and maintain economic stability in the face of global uncertainties.