The Executive Board of the International Monetary Fund (IMF) today completed the fourth review of Mozambique’s economic performance under the program supported by the Policy Support Instrument (PSI).1 In completing the review, the Board also approved the modification of three assessment criteria and one indicative target for June 2015 in line with the updated economic outlook for Mozambique.
The PSI for Mozambique was approved by the Executive Board on June 24, 2013 (see Press Release No. 13/231)
Following the Executive Board’s discussion, Mr. Min Zhu, Deputy Managing Director and Acting Chair, issued the following statement:
“Mozambique’s continued strong growth performance and low inflation are commendable. Investments in large coal and natural gas projects underpin a positive medium-term outlook, but low commodity prices have increased near-term risks.
“Recent program performance under the Fund’s Policy Support Instrument has been mixed. While structural reforms have been proceeding, there were macroeconomic policy slippages and reserve losses in late 2014. With a strong fiscal adjustment envisaged in the current budget and a recent tightening of liquidity conditions, needed steps to maintain macroeconomic stability are now in place. The decline in international reserves has largely been reversed, and greater exchange rate flexibility will help the economy to better respond to external shocks in the period ahead.
“The strong fiscal adjustment in the budget appropriately calls for revenue mobilization and expenditure restraint, while safeguarding social programs. Recent fiscal reforms have strengthened the policy framework but more needs to be done to improve public financial management, including by stronger controls over state-owned enterprises and enhanced management of fiscal risk.
“Ongoing progress on a broad range of structural reforms, including the passage of the new mining and hydrocarbon legislation, is encouraging. Nonetheless, further measures are needed to make poverty more responsive to growth and strengthen the business climate.”
The PSI is an instrument of the IMF designed for countries that do not need balance of payments financial support. The PSI helps countries design effective economic programs that, once approved by the IMF’s Executive Board, signal to donors, multilateral development banks, and markets the Fund’s endorsement of a member’s policies (see http://www.imf.org/external/np/exr/facts/psi.htm). Details on Mozambique’s PSI program are available at http://www.imf.org/mozambique.