IMF Staff Reaches Staff-Level Agreement on an Extended Credit Facility Arrangement with Mozambique

F.P. Report

Washington, DC: A staff team from the International Monetary Fund (IMF) led by Alvaro Piris conducted virtual meetings in January and February 2022, followed by a presential mission to Maputo, Mozambique during March 14-22 to discuss a three-year program under the Extended Credit Facility (ECF).

At the conclusion of the mission, Mr. Piris issued the following statement:

“The IMF team reached a staff-level agreement with the authorities of Mozambique on a three-year program supported by an arrangement under the ECF in the amount of about SDR 341 million or $470 million. The government’s economic program supported by the ECF arrangement aims to foster sustainable, inclusive growth, and long-term macroeconomic stability. The staff-level agreement is subject to IMF Management and Executive Board approval.

“In recent years the Mozambican economy has been hit by a series of severe shocks that risk intensifying vulnerabilities and worsening socioeconomic conditions. Devastating terrorist attacks in the north of the country have displaced more than 800,000 people and delayed the development of liquefied natural gas (LNG) projects. The government has managed to stabilize the security situation with assistance from bilateral and regional partners. Climate-change related cyclones and the COVID-19 pandemic have taken a toll on physical infrastructure and public health. Strong pandemic containment measures, paired with a successful vaccination campaign have allowed a gradual roll back of restrictive measures, while the government’s policies to mitigate the socioeconomic impact of the pandemic benefitted from international support — all factors jointly contributing to a steady recovery of the economy.

“The governments’ medium-term program, assisted by the IMF, focuses on growth, fiscal sustainability, and reforms in public financial management and governance. The program balances providing financing with moderate adjustment that will rebuild policy space and reduce debt and financing vulnerabilities. The agreed measures include a series of reforms to tax administration and VAT policy. On the spending side, the recently approved wage bill reform will, over time, reduce pressure on public finances from remunerating public servants and lead to convergence of the wage bill, as a ratio to GDP, towards average levels observed in the wider region.

“The joint program will also support the government’s reforms addressing long-term structural challenges in the management of public resources and governance. The program aims to maintain the pace of structural reforms to improve the management of fiscal resources. An important step will be the passage of a sovereign wealth fund (SWF) law, securing a strong institutional framework to manage natural resource wealth, focused initially on LNG. In the area of governance, the publication of the COVID audit report, submission to parliament of amendments to the Public Probity law and legislation on Anti-Money Laundering and Combating the Financing of Terrorism are key elements of the government’s program. The program also addresses transparency in debt management and the natural resource sector, key areas identified in the 2019 Diagnostic Report on Transparency, Governance and Corruption, prepared by the government with IMF support.

“Addressing poverty and providing social protection are an important part of the government’s reform agenda. Special COVID-19 support programs were important to mitigate the impact of the pandemic on lives and livelihoods of the most vulnerable in society. As these temporary programs wind down, the IMF-supported program includes space to fund an increase in permanent transfers to vulnerable households through the National Institute for Social Action (INAS). Staff will continue to collaborate with development partners in this area.”

The mission held meetings with Prime Minister Adriano Maleiane, the Minister of Economy and Finance Max Tonela, Bank of Mozambique Governor Rogerio Zandamela, Minister of Natural Resources and Energy Carlos J. Zacarias, Minister for Gender, Children and Social Action Nyeleti B. Mondlane, a representative for the Minister of Justice, other senior officials, development partners, and the private sector.