The International Monetary Fund (IMF) has authorized US$60.6 million in budgetary support for Mozambique, a decision that is considered as support for the economic policies and prospects of the southern African nation.
The Bretton Woods institution said in a statement late Thursday that its board had finished the second review of the Extended Credit Facility (ECF) agreement for Mozambique and had approved “the immediate disbursement of SDR 45.44 million (about US$ 60.6 million), usable for budget support.”
According to the statement, this takes Mozambique’s total ECF payouts to around US$212.1 million. The June 2021-approved ECF agreement aims to assist Mozambique in coping with the COVID-19 pandemic’s effects, lessen public debt and funding vulnerabilities, and promote higher and more inclusive growth through structural reforms.
With a year left, Mozambique has only received around 40% of the ECF agreement’s entire funding, which is about US$590.2 million. However, despite significant lapses in the budgetary sector, the IMF applauded Mozambique’s program performance, which has been generally favorable.
The funding authority said in the statement that “program performance has been widely favorable, though with notable slippages in the fiscal area, while important program commitments in the areas of fiscal governance and anti-corruption were completed.”
It claimed that the Maputo authorities had taken substantive actions to address macroeconomic challenges and keep the programme on track, especially to reduce the wage bill and keep the fiscal outlook aligned with programme targets.
“Growth is projected to increase in 2023, driven by increasing liquefied natural gas (LNG) production, agriculture, and services activities,” the Fund said.
Mozambique is one of the Southern African Development Community member states that have witnessed significant findings of natural gas reserves in recent years. Others are Namibia, Tanzania, and Zimbabwe.
Real gross domestic product growth is forecast to rise to seven percent this year from 4.2 percent in 2022, according to IMF figures on Thursday. Expected increases in LNG exports are expected to improve the current account balance going forward.
The IMF was happy that Mozambique’s inflation rate had returned to single digits due to proactive monetary policy and favorable import prices for fuel and food. However, the IMF warned that Mozambique faces significant downside risks to its outlook such as delays to LNG projects, inflationary pressures from higher wages, and the threat of natural disasters such as tropical cyclones.
It called on the Mozambican government to continue implementing sound policies and reforms to enhance resilience, foster social cohesion, and create opportunities for all.