Statement by the IMF Staff Representative

This paper discusses key findings of the Second Review Under the Policy Support Instrument for Mozambique. Overall performance under the program was satisfactory but encountered unexpected challenges. Domestic revenues were stronger than envisaged, but the end-December 2007 assessment criterion (AC) on net credit to government (NCG) was missed largely because of aid shortfalls for onlending to public enterprises and deficiencies in cash-flow management that are being addressed. Monetary policy remained prudent, but the end-year AC on reserve money was missed.

Abstract

This paper discusses key findings of the Second Review Under the Policy Support Instrument for Mozambique. Overall performance under the program was satisfactory but encountered unexpected challenges. Domestic revenues were stronger than envisaged, but the end-December 2007 assessment criterion (AC) on net credit to government (NCG) was missed largely because of aid shortfalls for onlending to public enterprises and deficiencies in cash-flow management that are being addressed. Monetary policy remained prudent, but the end-year AC on reserve money was missed.

The following information has become available since the staff report was issued. It does not change the thrust of the staff appraisal.

  • The following measures have been implemented: (i) the draft law on excise taxes for alcoholic beverages and tobacco was submitted to Parliament in mid-May (end- February 2008 structural assessment criterion); (ii) civil service salaries in the Ministry of Finance were paid through the integrated information management system (e-Sistafe) in April (April 2008 structural benchmark); (iii) the ministerial decree for the multi-currency single treasury account (CUT) was issued in early May; (iv) the draft strategic plan of the justice sector has been finalized and will be presented to the Council of Ministers by end-May.

  • Preliminary data, subject to revision, suggests that the authorities met the indicative program targets for end-March on reserve money and net international reserves by comfortable margins.

  • Monthly inflation has decelerated in the last three months, mainly because of weakening food price inflation in line with seasonality and in line with the program.

  • Government and development partners attended a high-level meeting on May 19, 2008, organized by Fund and Bank staff, to discuss policy responses to the high world oil and food prices. There was broad agreement to avoid extensive interventions, including sweeping price subsidies and tariff reductions, in favor of well-targeted support efforts, including well-targeted subsidies and higher safety-net cash-transfers, and measures to raise agricultural production.

Republic of Mozambique: Second Review Under the Policy Support Instrument and Request for Waiver of Nonobservance of Assessment Criteria; Staff Statement; Press Release on the Executive Board Discussion; and Statement by the Executive Director for the Republic of Mozambique
Author: International Monetary Fund