IMF Executive Board Concludes Third Review of Extended Credit Facility Arrangement for Mozambique

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The Executive Board of the International Monetary Fund (IMF) has completed the Third Review under Mozambique’s three-year Extended Credit Facility (ECF) arrangement. This decision enables an immediate disbursement of SDR 45.44 million (approximately US$60.7 million), which can be used for budget support. With this disbursement, Mozambique has received a total of SDR 204.48 million (around US$273 million) under the ECF arrangement. The overarching goal of the three-year ECF program is to bolster Mozambique’s economic recovery, diminish public debt, address financing vulnerabilities, and promote inclusive growth through structural reforms.

The performance under the program has been generally satisfactory. By the end of December 2023, five out of eight structural benchmarks (SBs) were met, and three out of four quantitative performance criteria (QPCs) were fulfilled. The Executive Board granted a waiver for nonobservance of the continuous performance criterion on non-accumulation of new public and publicly guaranteed external payment arrears, acknowledging remedial actions taken by the authorities to address delays in debt service repayment.

Furthermore, the Monetary Policy Consultation Clause (MPCC) band was breached at the lower bound due to a faster-than-expected deceleration in inflation. The Executive Board conducted consultations on this matter and endorsed the authorities’ request for modification of the MPCC.

The recent approval of the Sovereign Wealth Fund bill by Parliament in December 2023 signifies progress towards ensuring transparent and prudent management of natural resource wealth. However, sustained efforts in fiscal consolidation are necessary to reduce financing needs and manage debt vulnerabilities. Given well-anchored inflation expectations and weak non-mining growth, there is room for gradual monetary policy easing.

Mr. Bo Li, Deputy Managing Director and acting Chair, emphasized the following points after the Executive Board’s discussion:

1. Accelerating economic recovery, supported by liquified natural gas (LNG) projects alongside modest non-mining growth.
2. Decline in inflation pressures, although significant risks persist due to adverse climate events and security challenges.
3. Continued fiscal discipline to address high debt and tight financing conditions, focusing on revenue mobilization and expenditure reforms.
4. Gradual easing of the tight monetary policy stance in line with well-anchored inflation expectations.
5. Strengthening governance and fiscal structural reforms across various sectors to enhance institutional capacity and achieve development goals.

In conclusion, Mozambique is making progress in economic recovery and structural reforms, but concerted efforts are needed to address remaining challenges and safeguard macroeconomic stability.