IMF Completes Third Review Under the Policy Support Instrument (PSI) for Mozambique

This paper presents the staff report on the Republic of Mozambique’s Third Review under the policy support instrument. Mozambique is vulnerable to the global financial crisis and economic slowdown. Lower import prices will help reduce inflation and likely benefit the trade balance. Lower export volumes and reduced private capital inflows are expected to reduce economic growth. The turbulence could also spread to the financial system despite its limited integration into global financial markets. The government is focusing on strengthening policy operations, giving special attention to the tax system and public financial management.

Abstract

This paper presents the staff report on the Republic of Mozambique’s Third Review under the policy support instrument. Mozambique is vulnerable to the global financial crisis and economic slowdown. Lower import prices will help reduce inflation and likely benefit the trade balance. Lower export volumes and reduced private capital inflows are expected to reduce economic growth. The turbulence could also spread to the financial system despite its limited integration into global financial markets. The government is focusing on strengthening policy operations, giving special attention to the tax system and public financial management.

The Executive Board of the International Monetary Fund (IMF) has completed the third review of Mozambique’s economic performance under a three-year Policy Support Instrument (PSI). Mozambique’s economic program with the IMF remains on track and all the quantitative and structural assesment criteria to end-June 2008 were met. The Board’s decision was taken on a lapse of time basis.1

The PSI for Mozambique was approved on June 18, 2007 (See Press Release No 07/135) to support the nation’s economic reform efforts. It is aimed at consolidating macroeconomic stability and at achieving sustained economic growth and poverty reduction through the pursuit of prudent macroeconomic policies as well as promoting structural reforms. The strategy to achieve this goal remains set in the Mozambican authorities’ national poverty reduction strategy, Plano de Acçãopara Redução da Pobreza Absoluta (PARPA II).

1

The Executive Board takes decisions under its lapse of time procedure when it is agreed by the Board that a proposal can be considered without convening formal discussions.

Republic of Mozambique: Third Review Under the Policy Support Instrument: Staff Report; Staff Supplement; and Press Release
Author: International Monetary Fund