26 December 2012

Mozambique: IMF Praises Nation's "remarkable" Performance

Maputo — The International Monetary Fund (IMF) has praised Mozambique’s “remarkable” economic performance this year, which “built on a track record of strong economic policies that effectively supported growth, while bringing down inflation and strengthening international reserves”.

In a press release issued at the weekend announcing the conclusion of the fifth review of the Mozambican economy under the current three year Policy Support Instrument (PSI), the IMF Executive Board noted that “real GDP growth for 2012 is set to reach 7.5 percent, benefiting from a robust performance in the services sector and a stronger-than-expected contribution from the nascent coal industry”.

“While global risks are sizeable”, it continued, “the increase in coal extraction will continue to lead Mozambique’s economic growth, and Mozambique’s economic stability and prudent policy mix over the past few years should help the economy weather the global slowdown”

The release added that “the gradual easing of monetary policy in 2012 has supported private sector credit growth while preserving a low inflation environment. The prudent execution of the 2012 budget has contributed to a judicious policy mix that has fostered economic stability despite global uncertainty”.

All assessment criteria set by the IMF under the PSI for the first half of the year were met, “except for a temporary breach of the ceiling on net credit to the government”, and “there was broadly satisfactory progress in structural reforms, despite some delays”.

Mozambique’s economic programme under the PSI, the release adds “will continue to emphasize preserving economic stability and debt sustainability while promoting economic and social development. Monetary policy will be geared toward private sector credit expansion, while remaining committed to the medium-term inflation target”.

“Fiscal policy, through a prudent 2013 budget”, it continues, “will aim to utilize the available fiscal space to close the infrastructure gap and support an expansion of social safety nets to foster inclusive growth, consistent with the authorities’ four-year poverty reduction strategy (2011–2014)”.

The IMF also backed what it calls “prudent use” of commercial loans to meet Mozambique’s infrastructure needs, in the face of declining foreign aid.

A PSI is an agreement reached with the IMF by low-income countries that are not asking for IMF loans, but seek endorsement from the IMF for their policies. Without such endorsement it might prove difficult to obtain loans or grants from other sources.

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