IMF encourages government measures to curb inflationary pressure – Mozambique

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IMF encourages government measures to curb inflationary pressure – Mozambique

2:32 CAT | 14 Nov 2016

The International Monetary Fund (IMF) has encouraged the Mozambican government to continue adjusting monetary policy in a way that reduces inflationary pressures, limiting the growth of monetary aggregates and making the real interest rate positive.

According to the IMF, the measure will curtail credit growth, in a context where bad debt is likely to increase.

This information is contained in the latest IMF-led Economic Outlook for Sub-Saharan Africa and Mozambique report recently released and discussed in Maputo.

The document says that the resumption of the IMF program in Mozambique would help restore the confidence of economic agents, containing external pressures and stabilising the economy, but that the country should take steps of its own towards this end.

Among these are an effective, independent, international audit of the debts of Ematum, MAM and Proindicus. Auditing these entities, which have benefited from sovereign guarantees, and restructuring their debts with creditors could help make public debt sustainable, the IMF says.

The audit, which is to be carried out by a British company with which the Attorney General’s Office signed a contract last week, would also help implement sound macroeconomic policies. “But a durable and sustainable solution also involves the implementation of structural reforms by the Mozambican authorities,” the report reads.

The IMF also recommends strengthening the capacity for fiscal risk analysis and public debt management and [the adoption of] policies to diversify the economy and make it more competitive.

“Depreciation of the metical should also be an opportunity to increase competitiveness and reduce dependence on imports,” the IMF said.

Other long term and sustainable solutions mentioned are the improvement of the business environment, better connecting large projects and the rest of the economy, continuing the modernisation of the central bank, optimising the operation of monetary policy and ensuring financial stability.

Overall, the IMF understands that the government is taking steps in the right direction, as reflected in the communication to creditors about the fiscal pressures on the country and the adjustments of fiscal and monetary policies needed in the face of external pressures.

“The medium-term outlook is still positive for Mozambique,” the IMF says.

Source: Noticias