Front Matter Page
© 2001 International Monetary Fund
January 2001
IMF Country Report No. 01/17
Mozambique: 2000 Article IV Consultation and Second Review Under the Poverty Reduction and Growth Facility—Staff Report; Staff Statement; Public Information Notice and Press Release on the Executive Board Discussion; and Statement by the Authorities of Mozambique
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of a combined discussion of the 2000 Article IV Consultation and Second Review Under the Poverty Reduction and Growth Facility, the following documents have been released and are included in this package:
the staff report for the combined 2000 Article IV Consultation and Second Review Under the Poverty Reduction and Growth Facility, prepared by a staff team of the IMF, following discussions that ended on September 21, 2000 with the officials of Mozambique on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on December 1, 2000. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.
a staff statement of December 18, 2000 updating information on recent economic developments.
a Public Information Notice (PIN) and a Press Release, summarizing the views of the Executive Board as expressed during its December 18, 2000 discussion of the staff report on issues related to the Article IV consultation and the IMF arrangement, respectively.
a statement by the authorities of Mozambique.
The document(s) listed below have been or will be separately released.
Letter of Intent by the authorities of the member country*
Memorandum of Economic and Financial Policies by the authorities of the member country*
Selected Issues and Statistical Appendix
Technical Memorandum of Understanding*
*Also included in the Staff Report.
The policy of publication of staff reports and other documents by the IMF allows for the deletion of market-sensitive information.
To assist the IMF in evaluating the publication policy, reader comments are invited and may be sent by e-mail to Publicationpolicy@imf.org.
Copies of this report are available to the public from
International Monetary Fund • Publication Services
700 19th Street, N.W. • Washington, D.C. 20431
Telephone: (202) 623 7430 • Telefax: (202) 623 7201
E-mail: publications@imf.org • Internet: http://www.imf.org
Price: $15.00 a copy
International Monetary Fund
Washington, D.C.
Front Matter Page
INTERNATIONAL MONETARY FUND
REPUBLIC OF MOZAMBIQUE
Staff Report for the 2000 Article IV Consultation and Second Review Under the Poverty Reduction and Growth Facility
Prepared by the African Department
(In consultation with the Fiscal Affairs, Legal, Monetary and Exchange Affairs, Policy Development and Review, Statistics, and Treasurer’s Departments)
Approved by Anupam Basu and Leslie Lipschitz
December 1, 2000
Contents
Executive Summary
I. Introduction
II. Recent Economic Developments
III. Medium-Term Poverty Reduction and Growth Strategy
IV. Program for 2000–01
A. Fiscal Policy and Budgetary Transparency
B. Monetary Policy and Financial Sector Issues
C. Other Structural Reforms
D. Program Financing and External Sector Issues
E. Program Monitoring and Statistical Issues
V. Medium-Term Balance of Payments Outlook
VI. Progress Toward a Full PRSP and the HIPC Initiative Completion Point
VII. Staff Appraisal
Boxes
1. Foreign Exchange Market Development and Policies
2. Fiscal Transparency
3. Trade Policy
Figures
1. GDP, Savings, and Investment, 1997–20036
2. Inflation and Interest Rates, January 1998-November 2000
3. Exchange Rates, January 1997-October 2000
4. Central Government Finances, 1997–2003
Tables
1. Revised Phasing of Performance Criteria, Reviews, and Disbursements Under the PRGF Arrangement, 1999–2002
2. Quantitative Performance Criteria and Benchmarks Under the PRGF Arrangement, December 1999-September 2000
3. Structural Performance Criteria and Benchmarks Under the PRGF Arrangement, April-October 2000
4. Selected Economic and Financial Indicators, 1998–2001
5. National Accounts, 1998–2005
6. Government Finances, 1998–2002
7. Monetary Survey, 1998–2001
8. Balance of Payments, 1998–2005
9. External Financing Requirements and Sources, 1998–2005
10. Indicators of Fund Credit, 1998–2010
Appendices
I. Letter of Intent
Attachment: Memorandum of Economic and Financial Policies of the Government of Mozambique for 2000–01
Table 1. Quantitative Performance Criteria and Benchmarks Under the PRGF Arrangement, July 2000-June 2001
Table 2. Structural Performance Criteria and Benchmarks Under the PRGF Arrangement, October 2000-June 2001
Annex: Technical Memorandum of Understanding
II. Relations with the Fund
III. Relations with the World Bank Group
IV. Statistical Issues
V. Selected Social and Demographic Development Indicators
Executive Summary
Economic developments since the last Article IV consultation in June 1999 have been marked by a slowdown of economic growth, a rekindling of inflation, and a weakening external current account—linked in large part to the serious flooding that afflicted Mozambique in February-March 2000.
All quantitative and structural performance criteria for the present program review were observed. Government expenditure and the primary budget deficit through mid-2000 remained well within program limits, while revenue exceeded its target by a small margin. The central bank’s net domestic assets stayed below the program ceiling, but broad money expanded more rapidly than programmed, fueling higher inflation.
Liquidity and solvency problems at two commercial banks with minority shareholding by the government are being addressed through recapitalization and restructuring. In the case of Mozambique’s largest bank, shareholders have reached a firm agreement. In the third-largest bank, a decision is still pending, but bank supervision has taken strong safeguard measures.
Following a review of the system of tax and customs exemptions, the government has recently adopted some immediate administrative improvements and will proceed under the program with a more substantial reform, including of the legal basis of tax incentives. These and other tax reform measures promise a sustained increase in revenue from 2002.
A significant increase in government expenditure in 2000–01 reflects outlays for flood reconstruction, higher social sector spending, a boost in the government wage bill, and onetime outlays for bank recapitalization. In the absence of a near-term increase in revenue, the budget deficit will rise, to be financed by debt relief under the HIPC Initiative, higher concessional foreign borrowing, and a progressive drawdown of government deposits at the central bank.
The usefulness of the new quarterly budget execution reports will soon be enhanced by including information on HIPC Initiative debt relief and poverty-related expenditures. A fully satisfactory tracking of such expenditures will have to await the reform of the public expenditure management system recently launched by the government. The World Bank has agreed with the authorities to carry out a public expenditure review, work on which has begun.
The authorities remain committed to preparing the full PRSP, and meeting the other conditions for reaching the completion point under the enhanced HIPC Initiative, by end-March 2001. Much work on the PRSP will be required to achieve this goal.
Based on the authorities’ recent actions and policy intentions in the areas of revenue and expenditure management, monetary policy, and bank restructuring, the staff recommends that the Executive Board complete the second review of the current PRGF arrangement.
Front Matter Page
December 18, 2000
Front Matter Page
Public Information Notice (PIN) No. 01/4
International Monetary Fund
FOR IMMEDIATE RELEASE
700 19th Street, NW
January 17, 2001
Washington, D. C. 20431 USA
Telephone 202-623-6772
Fax 202-623-6772
Front Matter Page
Press Release No. 00/73
FOR IMMEDIATE RELEASE
December 19, 2000
International Monetary Fund
Washington, D.C. 20431 USA
Telephone 202-623-6772
Fax 202-623-6772
Front Matter Page
December 18, 2000
