Mozambique's economic growth slowed at the end of 2023
Mozambique has seen a recovery in economic growth, but is still fragile, an International Monetary Fund (IMF) representative in the country says.
“The recovery in growth in Mozambique is still fragile, as in many sub-Saharan African countries,” Ari Aisen said during a presentation of the IMF report on economic prospects for Sub-Saharan Africa in Maputo.
The IMF has projected that the Mozambican economy will grow 4.7 percent this year and 5.3 percent in 2018, but the figures are still subject to revision, he said.
A new analysis could result from the visit of a mission to the country from November 30 to December 13 in the context of the Article VI consultations between the IMF and government and various institutions.
Ari Aisen notes that Mozambique’s recovery is based mainly on the extractive industry (such as coal) which in the second quarter grew by about 60 percent (annual variation).
“It is worrisome that this modest recovery is very concentrated, and this may not be lasting,” he said.
The second-best sector during that period was fishing, with growth of 15 percent, with no other sector surpassing 10 percent growth – while tourism, financial services, construction, manufacturing, electricity and water registered falls of up to 10 percent.
Subtitle – 12.6 percent inflation this year
He also pointed out that “inflation is falling rapidly and this is very positive for the country”, with the IMF report projecting a 12.6 percent figure for Mozambique in 2017. Aisen believes the number could be even lower and the country could end the year with “single digit” inflation – after having reached 25 percent in 2016, according to government figures.
“The sharp fall in inflation paves the way for a less restrictive monetary policy that could support economic recovery,” he said. In turn, “the need for an additional fiscal adjustment persists, which could encourage the relaxation of monetary policy “.
Aisen argues that fiscal adjustment should give priority to “reducing current expenditure and seeking to protect expenditure on social sectors”, while “on the revenue side, it should seek to limit tax exemptions (VAT) and continue to strengthen tax administration”.
The IMF is looking positively for some reforms, for example with regard to the law of state-owned companies (ready for discussion by parliament) and the elimination of general subsidies, stressing that the changes “must continue”.
At the same time, he said that efforts should be made “to strengthen the management of public finances, including debt management, payments in arrears and the difficult financial situation of some public companies”.
Aisen also announced that the Ministry of Economy and Finance of Mozambique will from now on have a resident IMF adviser providing support for fiscal risk management in an initiative supported by Belgium and other international partners.
“A person in the ministry, assisting over the long term, could be useful to the country,” he concluded.
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