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IMF Country Report No. 20/141
REPUBLIC OF MOZAMBIQUE
REQUEST FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR THE REPUBLIC OF MOZAMBIQUE
April 2020
In the context of the Request for Disbursement Under the Rapid Credit Facility, the following documents have been released and are included in this package:
A Press Release including a statement by the Chair of the Executive Board.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on April 24, 2020, following discussions that took place on April 8 and 9, 2020, with the officials of the Republic of Mozambique on economic developments and policies underpinning the IMF arrangement under the Rapid Credit Facility. Based on information available at the time of these discussions, the staff report was completed on April 17, 2020.
A Debt Sustainability Analysis prepared by the staffs of the IMF and the International Development Association (IDA).
A Statement by the Executive Director for the Republic of Mozambique.
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
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© 2020 International Monetary Fund
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REPUBLIC OF MOZAMBIQUE
REQUEST FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY
April 17, 2020
Executive Summary
Context. The COVID-19 pandemic is expected to hit Mozambique hard, and the authorities have requested emergency Fund financial assistance through the Rapid Credit Facility (RCF). As of April 16, Mozambique had reported 29 positive cases of COVID-19 but this number is expected to increase rapidly. The impact of the shock is likely to be significant in the short-term, dashing prospects of a nascent economic recovery. Prior to the COVID-19 crisis, Mozambique was rebounding from two Tropical Cyclones (TCs) which struck in 2019 and for which Mozambique benefitted from an RCF disbursement in April 2019.
Request for Fund support. Given the large and urgent external and fiscal financing needs arising from the COVID-19 pandemic, the authorities are seeking financial assistance under the “exogenous shocks” window of the RCF. In the attached letter of intent (LOI), the authorities request a disbursement of SDR227.2 million, equivalent to 100 percent of quota, and they envisage a central bank on-lend of this disbursement to the Treasury. Staff assesses that Mozambique meets the qualification criteria and other applicable requirements and supports the request. While public debt is in distress, it is assessed to be sustainable in a forward-looking sense, and the capacity to repay the Fund is adequate. The IMF disbursement is expected to play a catalytic role in securing additional financing from Mozambique’s development partners, which authorities are actively seeking.
Macroeconomic policies and IMF engagement. The authorities’ immediate priority is to limit the impact of the pandemic and preserve macroeconomic stability. Health spending is being increased and measures to protect the most vulnerable members of society and support the private sector are being implemented. The authorities will undertake independent audits of crisis-mitigation spending and related procurement processes once the pandemic abates and will publish the audited results. In the meantime, they will publish the related large public procurement contracts and their beneficiaries. Exchange rate flexibility has been maintained. Beyond this short-term objective, the government remains fully committed to medium-term fiscal consolidation and its structural reform agenda to support inclusive and sustainable growth.
Approved By
David Owen (AFR) and Mark Flanagan (SPR)
An IMF team consisting of Messrs. Velloso (Head), Zavarce and Delepierre (all AFR), Endegnanew (SPR), Aisen (Resident Representative), Manguinhane (local economist) and Ms. Palacio (capacity development coordinator) exchanged information and held discussions with Mozambican authorities, including Minister of Economy and Finance Maleiane, Central Bank Governor Zandamela, and other senior government officials by video conferences on April 8 and 9, 2020. Mses. Carvalho, Gupta, Luo provided research support and Mses. Aliu and Prado assisted in the preparation of this report.
Contents
BACKGROUND
PRE-COVID-19 ECONOMIC DEVELOPMENTS
IMPACT OF THE COVID-19 PANDEMIC
POLICY ISSUES
FUND SUPPORT UNDER THE RCF
STAFF APPRAISAL
TABLES
1. Selected Economic and Financial Indicators, 2017–2025
2a. Government Finances, 2017–2025 (Billions of meticais)
2b. Government Finances, 2017–2025 (Percent of GDP)
3. Monetary Survey, 2016–2020 (Billions of meticais)
4a. Balance of Payments, 2016–2025 (Millions of US dollars)
4b. Balance of Payments, 2016–2025 (Percent of GDP)
5. Financial Soundness Indicators for the Banking Sector, 2016–2019
6. External Financing Requirements and Sources, 2016–2025
7. Indicators of Capacity to Repay the Fund, 2020–2032
APPENDIX
I. Letter of Intent
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REPUBLIC OF MOZAMBIQUE
REQUEST FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY—DEBT SUSTAINABILITY ANALYSIS
April 17, 2020
Approved By
David Owen and Mark Flanagan (IMF) and Marcello Estevão (IDA)
Prepared by the staffs of the International Monetary Fund (IMF) and the International Development Association (IDA)
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