IMF Concludes Visit to Mozambique Amid Economic Challenges and Recovery Prospects
The IMF team, led by Mr. Pablo Lopez Murphy, explored the policies supporting Mozambique’s Fifth and Sixth Reviews under the Extended Credit Facility. Economic contraction was noted due to social unrest, with a projected recovery in growth for 2025. Key fiscal challenges emphasized included the management of public spending and inflation control, and ongoing cooperation between the IMF and Mozambique authorities is essential for future stability.
The International Monetary Fund (IMF) team, led by Mr. Pablo Lopez Murphy, recently completed discussions with the Mozambican authorities regarding the Fifth and Sixth Reviews of the Extended Credit Facility (ECF) arrangement. The discussions, held from February 19 to March 4, 2025, proved fruitful and will persist virtually in the following weeks. Regarding fiscal, financial, and structural policies necessary for these reviews, Mr. Lopez Murphy highlighted both the challenges and opportunities facing Mozambique.
Economic conditions in Mozambique have faced sharp contractions, notably in the last quarter of 2024 due to social unrest, with real GDP declining by 4.9 percent year-on-year in that quarter. However, an overall growth rate of 1.9 percent was observed for the entire year. Looking ahead, growth is forecasted to rebound to 3.0 percent in 2025, contingent upon the normalization of social conditions and revitalization of economic activities, particularly in the services sector.
The IMF’s preliminary estimates indicate considerable fiscal challenges in 2024, exacerbated by the economic slowdown in the last quarter. To ensure fiscal and debt sustainability in 2025, it is crucial to implement fiscal consolidation strategies. The pressing need to manage wage bill spending effectively, reduce tax exemptions, prioritize social spending, and improve debt management practices has been emphasized to preserve macroeconomic stability.
Inflation rates have shown some pressures; however, they remain manageable. The Bank of Mozambique began a loosening cycle in January 2024, having reduced the policy rate by 500 basis points to 12.25 percent and lowered reserve requirements for local currency deposits from 39 percent to 29 percent. Despite challenges such as supply-chain disruptions and increased food prices, inflation has stayed below the target of 5 percent, reflecting the effectiveness of monetary measures.
During the mission, the IMF staff met with various high-ranking officials, including President Daniel Chapo and Prime Minister Maria Levy, as well as civil society, political parties, and private sector representatives. The IMF expressed gratitude for the cooperation and constructive dialogue with Mozambican authorities, and looks forward to continuing discussions regarding the program reviews in the upcoming weeks.
The IMF’s recent visit to Mozambique indicated significant economic challenges due to social unrest, yet also revealed a pathway toward recovery with projected growth in 2025. Key issues highlighted include the need for fiscal consolidation, effective management of public spending, and controlled inflation. Continued collaboration between the IMF and Mozambican authorities will be crucial for the successful completion of the ECF reviews and the nation’s economic stabilization.
Original Source: www.miragenews.com
