Republic of Mozambique
Staff Report for the Third Review Under the Policy Support Instrument and Request for Modification of Assessment Criteria: Staff Report; Supplement; and Press Release.

The Executive Board of the IMF has completed the third review under the three-year Policy Support Instrument (PSI) for the Republic of Mozambique. Mozambique continues to weather the global economic turmoil well. Real GDP growth is projected to remain above 7 percent in 2011, benefiting from good harvests, a robust performance in the services sector, and the coming online of new megaprojects in the natural resource sector. The authorities’ economic program under the PSI will continue to emphasize preserving macroeconomic stability and debt sustainability while promoting economic and social development.

Abstract

The Executive Board of the IMF has completed the third review under the three-year Policy Support Instrument (PSI) for the Republic of Mozambique. Mozambique continues to weather the global economic turmoil well. Real GDP growth is projected to remain above 7 percent in 2011, benefiting from good harvests, a robust performance in the services sector, and the coming online of new megaprojects in the natural resource sector. The authorities’ economic program under the PSI will continue to emphasize preserving macroeconomic stability and debt sustainability while promoting economic and social development.

I. Recent Economic Developments

Economic activity remains buoyant, notwithstanding the global economic turmoil. Progress in reducing inflation has been strong.

1. Mozambique’s growth performance remains robust. Economic activity in the first half of 2011 is estimated at 7½ percent, buttressed by good harvests and a strong performance in the tertiary sector. Economic growth will benefit from the coming online of two new coal mines in September, suggesting an annual real GDP growth rate of 7¼ percent, in line with previous projections. Mozambique’s economic grow this cementing the country’s rank as one of the fastest growing economies in the region (Figures 1 to 3).

MEFP ¶2

FIGURE 1.
FIGURE 1.

Mozambique: Macroeconomic Developments

Citation: IMF Staff Country Reports 2011, 350; 10.5089/9781463927899.002.A001

Sources: Mozambican authorities and IMF staff estimates and projections.
FIGURE 2.
FIGURE 2.

Mozambique: Resilience to Global Crises

Citation: IMF Staff Country Reports 2011, 350; 10.5089/9781463927899.002.A001

Sources: Mozambican authorities and IMF staff estimates and projections.
FIGURE 3.
FIGURE 3.

Mozambique: Regional Comparison

Citation: IMF Staff Country Reports 2011, 350; 10.5089/9781463927899.002.A001

Sources: Mozambican authorities and IMF staff estimates and projections.Frontier economies: Angola, Ghana, Kenya, Mauritius, Mozambique, Nigeria, Senegal, Tanzania, Uganda and Zambia

Mozambique: Comparison with Sub-Saharan Africa, Selected Indicators, 2004-11

article image
Sources: Mozambican authorities and IMF staff estimates.

Angola, Ghana, Kenya, Mauritius, Mozambique, Nigeria, Senegal, Tanzania, Uganda and Zambia.

For regional comparison, months of current year imports are used. Definition of reported broad money may vary across countries.

2. After peaking at end-2010, inflation has come down to single digits. The accommodating monetary policy stance adopted during the global crisis, together with balance-of-payments developments, had triggered a depreciation of the exchange rate and the emergence of strong inflation pressures in 2010. Mozambique is among the handful of sub-Saharan African (SSA) countries which has tightened monetary policy early in response to these development.1 The authorities’ policy tightening, the strong appreciation of the Metical, good harvests, and favorable developments in international food and energy prices helped bring down twelve-month inflation to 8¼ percent by October 2011, compared to its peak of 16½ percent at end-2010. This puts the authorities in a position to reach their inflation objective of 8½ percent for 2011. The food CPI was the main driver supporting the disinflation process, while the Government’s upward adjustment of fuel prices in April and July did not have a significant impact on headline inflation. However, core inflation (excluding food, energy, and transport) declined at a slower pace than headline inflation, standing at 6¾ percent in October compared to 11½ percent at its February peak.

uA01fig01

Index of Monetary Conditions

Citation: IMF Staff Country Reports 2011, 350; 10.5089/9781463927899.002.A001

3. Fiscal policy has supported the disinflation effort. Over the first semester of 2011, revenue performance has been strong, budget execution prudent, and the pace of execution of donor-financed capital spending slow. This, compounded by the slower-than-expected disbursements of nonconcessional borrowing (NCB) under the related program ceiling (US$900 million), helped contain aggregate demand and supported disinflation. Overall, current indications point toward a noticeably lower fiscal deficit for 2011 as a whole than previously envisaged.

4. Export performance and capital inflows have remained robust, while imports were lower than expected. The current account deficit is projected to decline slightly to about 11¼ percent of GDP in 2011. In addition to strong exports by megaprojects in the natural resource sector benefitting from rising commodity prices, traditional exports also enjoyed a healthy rebound. This should more than offset the import bill related to fuel and food products and investment by megaprojects. These developments, together with robust aid and private capital inflows (including capital injections for several foreign-owned banks to support their business expansion), should keep the import cover of reserves at 4.5 months this year.

Mozambique: Selected Economic and Financial Indicators, 2009-16

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Sources: Mozambican authorities; and IMF staff estimates and projections.

II. Performance Under the PSI and Policy Challenges

Mozambique’s record under the PSI remains strong. The authorities’ policy mix aims to support macroeconomic stability and accommodate spending needs for growth-enhancing investment, social development, and possibly shock mitigation. To ease this task, the authorities seek to create fiscal space—by further increasing the revenue base and prudently expanding their NCB and domestic borrowing—while better prioritizing spending, upgrading natural resource management, and putting in place better targeted social support mechanisms.

A. Performance Under the PSI

5. All the quantitative program targets for end-June 2011 were met, except the AC on RM which was exceeded marginally. While RM growth was negative in the first half of 2011 and, until May, was on a path to allow meeting the end-June AC, some spikes in bank reserves in June2 and the seasonal strong demand for currency brought average RM above its targeted ceiling. However, end-month RM growth, at 17½ percent, was broadly in line with the envisaged end-month target underlying the macroeconomic framework. RM growth deceleration continued in the third quarter, and the indicative target for end-September was met comfortably. Buoyant revenue collections and a prudent fiscal policy stance allowed the Government to meet the program targets on revenue and net credit to the government (NCG) by a large margin. Delays in donor project aid resulted in the non-observance of the quarterly indicative floors on priority spending, but the authorities are confident that the unchanged annual target would be achieved.

uA01fig02

Quarterly Growth Rate of Reserve Money, 2009Q1-2011Q4

(In Percent)

Citation: IMF Staff Country Reports 2011, 350; 10.5089/9781463927899.002.A001

Sources: Mozambican authorities and IMF staff estimates

6. The authorities complied with structural conditionality. The end-July structural benchmark on the launch of the civil service and wage payment database was met. The benchmark on the submission of the anti-corruption legislation to Parliament was observed by end-October instead of end-July; this high-quality piece of legislation—based on the assessment of an external consultant presented to development partners—was approved by Cabinet on time, but repackaging some measures and completing their costing took more time than anticipated.

B. Short-Term Challenge: Curbing Inflation

Monetary Policy

7. The authorities remain determined to further reduce inflation. Their objective is to contain end-of-period inflation to 8½ percent in 2011 and below 6 percent in 2012, barring any unforeseen exchange rate pressures or commodity price spikes.

8. The BM is committed to keeping monetary expansion under close control. In 2011, it aims to contain RM growth to 13 percent, slightly tighter than envisaged at the second review. Going forward, in tandem with the authorities’ progress in combating inflation, RM growth will gradually accelerate and expand slightly above nominal GDP growth to enable more private sector credit growth and support financial deepening (Figure 4). The strengthening of coordination with the Government will allow the BM to improve its liquidity forecasting and more effectively steer monetary conditions.

MEFP ¶9-10

9. The BM is building capacity to move toward inflation targeting. Supported by IMF technical assistance (TA), it has made progress in collecting and analyzing data, developing forecasting techniques, and setting the stage for more transparent and efficient communication aimed at anchoring price expectations. In this context, the BM will publish its first quarterly monetary policy report in May 2012 (structural benchmark). The policy document is expected to cover a broad range of issues, such as the international policy environment, the domestic economic activity and outlook, and an analysis of policy developments. In addition, the authorities seek to enhance the effectiveness of money market operations, develop domestic financial markets, and improve the liquidity of government securities. As an important first step in this regard, based on TA recommendations, they will equalize the tax treatment of various government securities and between collateralized and uncollateralized interbank market operations by end-September 2012 (structural benchmark).

MEFP ¶10-11

Fiscal Policy

10. The fiscal deficit is likely to be smaller than expected in 2011. Based on buoyant revenues, the domestic primary deficit will be kept close to 3 percent of GDP, while lower spending on NCB-financed projects will result in a noticeably lower overall fiscal deficit than initially programmed. The NCG will be slightly higher than planned—but still be well contained—due to a shift in budget support between 2011 and 2012 agreed upon with two donors.

MEFP ¶14-15

11. In 2012, a looser fiscal stance will accommodate the authorities’ public investment and social development plans. The overall fiscal deficit will rise from 3½ to 5¾ percent of GDP, reflecting in particular a pick-up in externally-financed infrastructure investment and additional resources allocated to social protection under the 2012 budget relative to 2011 (see below). However, current expenditure is expected to be restrained in real terms. The execution of the budget will remain subject to the revenue contingency under the organic budget law which caps budget execution as long as revenue collections remain uncertain. As revenue performance is expected to remain strong, this will result in a decline of the domestic primary fiscal deficit by about 1 percentage point, to 2 percent of GDP, mitigating the impact on inflation (Figure 5).

uA01fig03

Impact of fiscal policy on domestic demand

(change from previous year - GDP%)

Citation: IMF Staff Country Reports 2011, 350; 10.5089/9781463927899.002.A001

Sources: Mozambican authorities and IMF staff estimates and projections.* The overall balance overstates the domestic impact of capital spending as the latter has a significant import content. The DDI calculation attempts to adjust for this bias.

C. Medium-Term Challenge: Creating Fiscal Space for More Inclusive Growth

Policy Mix

12. Over the medium term, the authorities are determined to accelerating public investment and spending more on social support mechanisms. While monetary policy will continue to be geared toward achieving low levels of inflation, fiscal policy will aim to step up public investment to close the infrastructure gap (which hampers long-term growth) and support an expansion of the social safety nets to address chronic poverty.3 The authorities reaffirmed their commitment to expand public investment on a path that is consistent with safeguarding macroeconomic stability and debt sustainability over the medium term.

MEFP ¶17-18

Constraint

13. Mozambique is likely to face a leveling off in net aid flows. Donor support has been key to providing resources for the country’s development needs in a sustainable way. Net aid flows have already significantly declined from the global crisis-related peak of 14½ percent of GDP in 2009 to 12½ percent of GDP in 2010, and are projected to level off to below 10 percent of GDP from 2011 onward, reflecting a reorientation among some donors and the rapid growth of Mozambique’s GDP. Furthermore, donors tend to increasingly condition general budget support on performance, particularly in the governance area, and to shift support toward sectoral or project support, which may complicate the predictability of budget execution. These trends may force the authorities to revisit their development and poverty reduction financing strategy.

Revenue Effort

14. Government revenues are set to make a major contribution to creating the necessary fiscal space for more inclusive growth but need to become more diversified. Tax revenues have continuously increased at a strong pace over the past five years, boosting the revenue/GDP ratio from 15 percent to 21½ percent in 2011. The authorities are committed to maintaining their tax administration effort while making the tax system more business-friendly through several structural measures. This is expected to raise revenue performance to 23½ percent of GDP over time. Among other things, the authorities will introduce by end-June 2012 a new single taxpayer and identification number that will enhance the efficiency of tax administration (structural benchmark).

MEFP ¶23

Figure 4.
Figure 4.

Mozambique: Monetary and Financial Sector Developments

Citation: IMF Staff Country Reports 2011, 350; 10.5089/9781463927899.002.A001

Sources: Mozambican authorities and IMF staff estimates and projections.
Figure 5.
Figure 5.

Mozambique: Fiscal Developments

Citation: IMF Staff Country Reports 2011, 350; 10.5089/9781463927899.002.A001

Sources: Mozambican authorities and IMF staff estimates and projections.

15. However, the increase in revenues seen in the recent past will not be sustained absent additional sources of income, especially from the booming natural resource sector (Box 1). To this end, the authorities intend to revisit the sector’s fiscal regime, based on IMF TA likely to take place in early 2012 under the new Topical Trust Fund for Managing Natural Resource Wealth (TTF-MNRW). They are also reviewing existing contracts with investors in the sector to assess the scope of an amicable renegotiation that would bring the sector’s tax contributions in line with the new fiscal regime. In the process, they will carefully balance the aim to raise revenues with the need to preserve Mozambique as a destination for FDI. Staff also advocated the creation of special fiscal institutions, such as a stabilization fund, that could enhance the authorities’ capacity to use large additional revenue and adjust short-term spending to inter-temporal revenue flows, while supporting investment plans. This would be critical to ensure external competitiveness and the diversification of the economy. Finally, the authorities will expedite their efforts to become a full-fledged member of the EITI in the near future, but no later than the target date set by the EITI of February 2013.

MEFP ¶24-25

Natural Resource Management and Growth

Mozambique’s natural resource reserves are still largely unexploited. Its diverse geology offers a wide range of minerals and metals, including coal, natural gas, mineral sands, and potentially oil. With the starting of operations of the coal projects in Tete (central Mozambique) and the upcoming expansion of natural gas production, the natural resource sector is set to boom in the near term.

Consistent with past experience, natural resources are likely to make a substantial contribution to economic growth and exports going forward. Preliminary estimates suggest that megaprojects can directly contribute up to 18 percent of total value added by 2016 and boost economic growth by 2 to 4 percentage points annually.1 In the same vein, they are likely to increase their share in total exports, which already now accounts for 70 percent. By contrast, they are unlikely to provide a boost to employment, given their capital intensity.

With a higher contribution to government revenues, the sector could allow to decisively step-up pro-growth spending over the long run. Megaprojects’ contribution to government revenues has been disproportionately low, at 3 to 4 percent during 2006-10.2 A more efficient fiscal regime, together with enhanced revenue forecasting and revenue diversification, could create significant space for pro-growth spending, including for social protection, over the long run.

1 See Appendix II for an estimate of the direct impact of megaprojects on the growth of the total value added in the economy.2 See also IMF Country Report No. 11/149.

Borrowing Strategy

16. The authorities’ recourse to NCB is likely to rise but will remain consistent with macroeconomic stability and debt sustainability. The cumulative NCB ceiling of US$900 million under the three-year program has so far been prudently used for two loans totalling US$146 million for two airport projects. The financing of other large infrastructure projects, including the port of Beira and hydro-electricity projects, is being considered and, given the projects’ size, could rapidly bring Mozambique’s nonconcessional contractual debt closer to the program ceiling. Nonetheless, the authorities are committed to pacing actual project implementation-including under the Portuguese credit line-such that it is consistent with the country’s macroeconomic circumstances.

Mozambique: Total Public Investment Program, 2009-16

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Source: IMF staff calculations.

Portuguese credit line that will be implemented by the Road Fund.

17. Stepping up debt management and investment planning is pivotal to making good use of NCB and improving spending efficiency. The authorities reiterated their commitment to intensify the modernization of their debt management and project selection procedures. Drawing on IMF TA and World Bank capacity training, they will complete their medium-term debt strategy and second debt sustainability analysis such that they can be submitted for Cabinet approval in the first quarter of 2012. They are also set to develop an annual domestic borrowing plan and strengthen project selection processes. Staff concurred with the authorities’ request to delay the completion of the structural benchmark on the Integrated Investment Plan from end-2011 to end-March 2012 to allow key ministry officials to benefit from World Bank training on project selection.

MEFP ¶21-22

Prioritization of Spending

18. Current spending allocations will be better prioritized. In particular, the authorities aim to phase out the ill-targeted and costly fuel subsidy and replace it with more efficient subsidies and social protection systems. The adjustments of diesel and gasoline prices in April and July by a cumulative 18 percent left only the diesel price subsidized, which they expect to end by early 2012. In early September 2011, consistent with the new four-year Poverty Reduction Strategy (PARP), Cabinet decided to launch the roll-out of a basic social protection initiative in 2012, by revamping the cash transfer system and introducing a labor-intensive public works program in urban and rural areas, as devised under a pilot program with support from UNICEF, the ILO, the World Bank, the IMF, and bilateral partners. At the same time, they aim to further strengthen their handle on the wage bill, which had risen sharply toward the end of the last decade and triggered a strategic review of the civil service wage policy. In addition, based on the successful pilot of the civil service and wage database in selected provinces, the database will be rolled out to all provincial directorates by end-June 2012 (structural benchmark).

MEFP ¶16-17, 19

III. Risks to the Program

Risks to the program have increased, but appear manageable due to sound macroeconomic indicators, good policy implementation, and expected continued support by partners.

19. Risks to the implementation of the program stem primarily from a potential global downturn. Mozambique could be affected through the same transmission channels as during the 2008/09 crisis? lower trade and lower access to international finance. Additional risk factors could now also emanate from lower aid flows and the indirect exposure of the banking system to the sovereign debt and banking crisis in the euro area. Though current indications point to no immediate concerns in these areas, policy options should be preventively considered to thwart these risks (Box 2).

The Impact of the European Crisis

The euro area crisis has not had any major adverse impact on the Mozambican economy thus far, and its effects appear circumscribed to the relations with Portugal.

  • Aid commitments have largely been confirmed for 2012. Although most European countries face intense budget constraints, any future change in aid volume or modalities is more likely to be the result of on going policy reorientations among donors or their concerns on governance and the implementation of the PARP than the direct impact of the sovereign and banking crisis.1 In any case, continued aid will be crucial in the event of a sharp downturn to support economic development.

  • Public investments from Portugal have slowed. The first disbursement under the nonconcessional Portuguese credit line to build road infrastructure was delayed to October 2011. Disbursements under the credit line’s concessional window have occurred at a slower pace than initially envisaged. In addition, the National Investment Bank set up by the Mozambican and Portuguese governments has begun to operate in June 2011, but only with a small fraction of the originally planned capital.

  • The banking sector has generally remained resilient to the crisis.2 Most foreign-owned Mozambican banks benefited from a substantial capital increase earlier this year. Together with a slowdown in credit activity, this has sharply raised the system-wide capital adequacy ratio to 18.7 percent at end-June 2011. The Mozambican subsidiaries remain a source of operating income for their Portuguese parents. The appreciation of the Metical vis-à-vis the Rand has increased the profitability of the South African subsidiaries within their groups.

  • Nonetheless, tight liquidity conditions resulting from the BM’s disinflation policy and funding pressures of parent banks led to a reduction in risk taking and curtailed credit growth. The two largest Mozambican banks (which account for 60 percent of the banking system’s assets) are owned by the three major Portuguese financial institutions that experienced funding pressures through their exposure to European sovereign risks. An analysis of aggregate intra-group cross- border flows suggests that large Mozambican banks which traditionally maintained substantial deposits in parent banks have curtailed their intra- group exposure over the past few months, thus reducing vulnerabilities.

uA01fig05

Large Foreign Owned-Banks Intra-Group Net Exposure

(Assets minus liabilities, Billions of MT)

Citation: IMF Staff Country Reports 2011, 350; 10.5089/9781463927899.002.A001

1 On governance concerns, see Box 1 in IMF Country Report No. 10/174.2 Results of stress tests on the banking system are presented in Appendix IV of IMF Country Report No. 11/149.

20. Mozambique is well positioned to mitigate the impact of a temporary global downturn. The overall sound macroeconomic indicators and the prudent policy mix over the last few years—including the timely tightening of monetary policy to fight inflation—should facilitate the authorities’ policy response should external conditions deteriorate. In such an environment, should external funding sources for the private sector dry up like during the 2008/09 global crisis, progress in containing inflation could justify a more accommodating monetary policy stance. Fiscal policy should continue to be guided by medium-term considerations, including maintaining planned priority spending to the extent possible; the more accommodating monetary policy stance could compensate, at least partially, shortfalls in donor support through higher domestic financing, to the extent that this can be done without crowding out private sector credit. At the same time, the authorities could allow automatic stabilizers to operate temporarily on the revenue side.

21. The completion of the comprehensive financial sector contingency plan under the program would help the authorities cope with a worst-case scenario. The authorities have already implemented the modules to put into motion prompt corrective actions in case of a banking crisis and to strengthen coordination with foreign supervisors. In addition, they are contemplating stronger limits on concentration of intra-group deposits, so as to limit cross-border contagion risks.

MEFP ¶30

22. Spillovers from economic developments in South Africa need to be monitored closely. This is notably the case of possible sharp exchange rate swings. As imports from South Africa account for one-third of total imports, the bilateral exchange rate is a key determinant of price developments in Mozambique, particularly for food products. It also weighs on imports of South African intermediate goods for infrastructure projects. On the export side, the exchange rate impacts revenues from electricity exports to South Africa (about 12 percent of total exports) since the contracts are Rand-denominated. Additional risks emanate from the high volatility of capital flows to emerging economies and the possible effect of a weaker South African economy on FDI inflows.

IV. Program Monitoring

23. Modifications are proposed for several ACs for end-December 2011 and the RM adjuster. The ACs on NCG, RM, and NIR were adjusted according to performance to date and the authorities’ short-term policy objectives. Going forward, in light of the BM’s improved forecasting capacity, it is proposed to reduce the adjuster for the RM targets, which applies whenever the actual stock of currency in circulation exceeds the level envisaged in the program. The adjuster will be capped to MT 250 million for end-March, end-June, end-September and end-December 2012, and will be discontinued thereafter.

24. It is proposed to discontinue the continuous structural benchmark that limits the use of NCB to spending in energy and transportation infrastructure. The authorities’ progress in strengthening debt management capacity, and the prudent use of NCB, have made this benchmark unnecessary. The authorities welcomed this recognition of their track record of prudent borrowing decisions and reforms, although they reaffirmed their strategy to continue to focus NCB on investment in energy and infrastructure.

25. Structural conditionality will be in the areas of Fund expertise. Staff and the authorities agreed to structural conditionality in the areas of tax administration and policy, the monetary policy framework, and public financial management.

Structural Conditionality, 2012

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Proposed to be delayed from end-December 2011 to allow officials in the Ministry of Plan and Development and line ministries to benefit from World Bank capacity building training on project selection.

V. Staff Appraisal

26. Mozambique’s economic performance remains strong. The tightening of monetary policy in 2011 has been effective in curtailing inflation and had no adverse repercussions on the buoyant and broad-based economic activity. The prudent execution of the 2011 budget has contributed to a judicious policy mix that has fostered the consolidation of macroeconomic stability at a critical juncture and positioned the country well to respond to downside risks should such a need arise.

27. The authorities’ determination to further reduce inflation is appropriate. Staff supports the objective to contain end-of-period inflation to 8½ percent in 2011 and below 6 percent in 2012, which appears feasible absent adverse economic developments. Staff encourages the authorities to adjust macroeconomic policies if necessary to safeguard the inflation objective. The BM’s intention to keep monetary expansion under close control, yet slightly above nominal GDP growth, should support financial deepening and an appropriate expansion of private sector credit. Strengthened coordination between the Government and the BM should allow the BM to further improve its liquidity forecasting and more effectively steer monetary conditions. The BM’s work on the technical prerequisites to move, at the appropriate time, to an inflation targeting framework is welcome.

28. Going forward, the focus of fiscal policy on fostering the country’s infrastructure and social development is welcome. With inflation on a downward trajectory and approaching the authorities’ medium-term objectives, the authorities rightly envisage an increase in public investment and a gradual expansion of social protection systems from 2012 onwards to support the country’s economic development and social cohesion. Nonetheless, while Mozambique’s infrastructure gap is large, the authorities should continue to pace their development agenda in line with the need to preserve medium-term macroeconomic stability and debt sustainability—consistent with their strong track record to date in this area.

29. The envisaged creation of fiscal space to support the development agenda requires prudent policy decisions going forward. This is all the more important since donor support is likely to level off over time. The Government’s intention to pursue their tax administration and policy reforms and work on various fronts towards a larger contribution of the natural resource sector to the revenue base is thus welcome. Staff recommends that the authorities consider the creation of a fiscal stabilization fund early on so as to lay the foundation for maintaining macroeconomic stability for the event that the increased revenue flows materialize. With respect to NCB, the authorities are encouraged to carefully assess their financing options and underlying projects so as to ensure an adequate economic return for this more expensive form of borrowing. In this context, modernizing debt management and strengthening investment planning and selection are critical structural reforms in order to further improve economic decision-making. In their project selection decisions, the authorities are encouraged to focus on the catalyzing role of public investment in crowding in private investment and promoting domestic trade and employment.

30. In the same vein, further improvements in prioritizing current spending are critical to help the authorities meet their social development objectives. The Government’s steps towards the phasing-out of the costly fuel subsidy are thus welcome. The authorities are advised to ensure adequate budgetary allocations for the envisaged expansion of the recently adopted social protection schemes. The success of these reforms will be a crucial, and visible, marker in the implementation of the social development strategy under the PARP.

31. Based on program performance and the authorities’ strong ownership of the Fund-supported program, staff recommends completion of the third review under the PSI. Staff also recommends a waiver for the minor nonobservance of the end-June AC on RM, the modification of ACs, and the re-phasing of the structural benchmark on the Integrated Investment Plan.

Table 1.

Mozambique: Selected Economic and Financial Indicators, 2009-16

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Sources: Mozambican authorities; and IMF staff estimates and projections.

Consistent with DSA definition, the nonconcessional Portuguese credit line is included under the external debt.

Includes disbursements of IMF resources under the ESF and August 2009 SDR allocation.

Table 2.

Mozambique: Government Finances, 2009–12

(MT Billions)

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Sources: Mozambican authorities; and IMF staff estimates and projections.

Residual discrepancy between identified sources and uses of funds.

Revenue minus noninterest current expenditure minus locally financed capital expenditure and locally financed net lending.

Table 3.

Mozambique: Government Finances, 2009–16

(Percent of GDP)

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Sources: Mozambican authorities; and IMF staff estimates and projections.

Residual discrepancy between identified sources and uses of funds.

Revenue minus noninterest current expenditure minus locally financed capital expenditure and locally financed net lending.

Table 4.

Mozambique: Monetary Survey, Quarterly, 2010-12

(MT Billions, unless otherwise specified)

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Sources: Bank of Mozambique; and IMF staff estimates and projections.

As defined in the TMU (excluding the non concessional Portuguese credit line).