Mozambique: IMF approves review of financial adjustment programme, releases $60M

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Mozambique: IMF approves review of financial adjustment programme, releases $60M

2:28 CAT | 22 Nov 2022

File photo: Macauhub

The International Monetary Fund on Tuesday announced its approval for the first review of Mozambique’s financial adjustment programme, allowing for the disbursement of almost $60 million (€58 million), on the grounds that the targets set have been met by the country.

“All end-June 2022 program performance criteria, indicative targets and the structural benchmark were met,” reads an IMF statement announcing its board’s approval of the first review of the Extended Credit Facility (ECF) “The monetary policy stance and proactive tightening since early 2021 are deemed appropriate to address higher than expected inflation”.

Approval of the first review of the three-year programme, which was itself approved in May, means the immediate disbursement of $59.2 million of the total $456 million included in the financial adjustment programme, of which Mozambique has already received around $150 million.

“Growth is projected to increase in 2022, with the strengthening economic recovery despite the worsening international economic environment and rising commodity prices, reflecting a strong vaccination campaign and full lifting of COVID-related restrictions in July 2022,” the statement adds.

Among the main risks to meeting the programme’s objectives, the IMF highlights rising prices, which have already pushed inflation into double digits, social unrest, terrorist activity in the north of the country and natural disasters – all of which is nevertheless offset by the strengthening economic recovery, strong demand prospects for liquefied natural gas and the possibility of higher-than-expected growth in other sectors of the economy in the medium term.

“Program performance has been strong, with all quantitative targets and the structural benchmark met at end-June,” the statement quotes the IMF’s deputy director, Bo Li, as saying. “While the outlook remains positive, driven by large liquefied natural gas (LNG) projects, significant risks remain, including from adverse climate events and fragile security situation”.

“Governance weaknesses and debt vulnerabilities also pose challenges. In that context, continued capacity development and donor support remain imperative for Mozambique to achieve its development objectives,” Bo Li is quoted as saying.

The IMF deputy director also stressed the need for “additional efforts … to mitigate revenue volatility, continue strengthening public investment management, and integrating natural resource revenues into the broader fiscal framework”.

Source: Lusa