core sector communique

IMF Mission Concludes Discussions on Program Review with Mozambique

October 29, 2010

An International Monetary Fund (IMF) mission visited Mozambique during October 19-29, 2010 to conduct the first review under the new three-year Policy Support Instrument (PSI) which was approved in June. Policy discussions were held with the Minister of Finance, Hon. Manuel Chang; the Minister of Planning and Development, Hon. Aiuba Cuereneia; the Governor of the Central Bank of Mozambique, Hon. Ernesto Gouveia Gove; and other senior government officials. The mission also held meetings with representatives of the private sector, civil society, and development partners. The mission briefed the Prime Minister, Hon. Aires Bonifácio Baptista Aly, on the mission’s findings.

Mr. Johannes Mueller, Mission Chief for Mozambique, issued the following statement in Maputo at the conclusion of the mission on October 29:

“Mozambique’s economic performance remains strong, notwithstanding a difficult external environment. Economic growth could exceed 7 percent in 2010 and is projected to accelerate to 8 percent over the medium term. A recovery in external demand, rising private capital inflows, and continued strong donor support should improve Mozambique’s external accounts and bolster its international reserves at comfortable levels. Nonetheless, the accommodating monetary and fiscal policies adopted in the wake of the global crisis, together with balance of payments pressures, contributed to a depreciating exchange rate and a rise in inflation, which has placed a considerable burden on the most vulnerable segments of the population.

“With economic growth on a solid footing, the mission supports the authorities’ intention to counter the emergence of inflationary expectations through a tightening of their macroeconomic policies. This should help return headline inflation to single-digits next year. Supporting the Bank of Mozambique’s unwinding of the monetary stimulus adopted during the global crisis, the government intends to further strengthen its revenue collections and prioritize its spending in an effort to reduce the primary domestic fiscal deficit in 2011. The mission welcomes that spending will favor the priority social sectors and infrastructure investment in an effort to strengthen the country’s productive base and provide a catalytic effect for private sector activity. The program’s structural reform focus will continue to be on public financial management, tax policy and administration, debt management, and a strengthening of the financial sector.

“The mission commends the authorities’ dedication to drafting a new Poverty Reduction Strategy over the next few months, in close consultation with the private sector, civil society, and development partners. It considers the new strategy a welcome opportunity to work towards making Mozambique’s impressive economic growth more inclusive, with a view to generating employment opportunities and improving household livelihoods.

“The IMF's Executive Board is scheduled to discuss the first PSI program review under the new program in December 2010.”