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International Monetary Fund. African Dept.
This paper highlights the Republic of Mozambique’s first review under the Three-Year Arrangement under the Extended Credit Facility, and request for modification of the monetary policy consultation clause, and financing assurances review. The economic recovery is strengthening, as a successful vaccination campaign and recovery from coronavirus disease-related restrictions dominate headwinds from the worsening international economic environment. Growth is projected at 3.8 percent this year, rising to 5 percent in 2023 as the first liquefied natural gas project enters production. Food and fuel prices have pushed inflation to double digits. Monetary policy has been proactive, including a further 200bps increase in the policy rate in September 2022. Risks from the conflict in the north of the country have abated somewhat, with local populations beginning to return to affected areas. However, security risks and population displacement remain critical challenges. Natural disasters and structural food insecurity are significant risks. All performance criteria, indicative targets and the structural benchmark for end-June 2022 were met. The monetary policy consultation clause inflation consultation band was breached in June 2022, reflecting higher international food and fuel prices as well as the effects of floods in Mozambique.